How Do I Start to Build Credit?

A method many people use to begin building their credit is:

  1. Start by opening an account at your favorite financial institution.  While it won't appear on your credit report, you may be asked to provide account numbers when completing credit applications. Having an existing (and positive) relationship with your financial institution of choice may be seen as a contributing factor when they consider your requests for other services.

  2. Next, apply for a credit card. Sometimes, department store or gas credit cards are the first many consumers apply for. Consider applying for a secured card.  With a secured card, you will have a credit limit based on the amount of money you will have on deposit in a savings account.  The card is used the same as any other credit card.

  3. Now, begin using your credit card for purchases.  To make sure you can pay your bill when it comes on a monthly basis, consider keeping a record of your credit purchases, just as you do a transaction register for your checking account.  If you can't pay off the entire balance, be sure to pay at least the minimum payment on time each month, and pay more if you can possibly afford to.

  4. Additionally, you might want to apply for a secured loan from your financial institution, secured by the money you have on deposit or in the case of an auto loan, the car itself.
  5. You can ask a friend or relative with good credit to co-sign or co-borrow on a loan with you which makes both of you legally responsible for repaying.

  6. If you are denied credit, find out why.  It could be your income, job, credit history, or a multitude of other reasons.  You can also request a free copy of your credit report.  Be sure to check it for accuracy and report any corrections that need to be made.

As you're building your credit, have patience.  You're establishing a record of consistent payments that shows you are credit-worthy.