Establishing credit

Building credit history when you're starting from square one

Establishing good credit can go a long way toward helping you build and maintain your credit history. With determination, planning, and maybe a little help from others, you'll be on the path toward good credit.

Getting started

Building your credit history from scratch may feel challenging. Lenders want to see that you've established good credit before they lend you money. But to build a good credit history, you need to have credit.

If you're just starting out, here are some options that may be available to you:

Authorized user or joint account holder.

Someone you know adds you to their credit card

Co-signed credit card or loan.

You apply for credit jointly with someone who already has a credit history

Rent or bill reporting.

You ask a landlord or other service provider to report your payment activity to the credit bureaus

Store or gas card.

You open a card at a business you shop at often

Choosing the right option for you

Before deciding on the right option for you, think about your needs. Here are some things to consider:

• The fees and interest rates a product charges (secured cards, for example, often charge high fees)
• The person responsible for monthly payments
• The amount of the loan or credit limit
• How you plan to use the loan or product
• Whether you feel confident that you'll be able to make the required payments on time
• Typically, each time you apply for credit or a loan, a hard inquiry (also known as a credit check) will appear on your credit history. Too many credit checks, especially in a short period of time, could lower your credit score.
• Rather than applying for everything available to you, consider picking one or two options that best fit your needs.

Building good credit

Building good credit can help expand your credit options to get new cards, potentially reduce your monthly payments, or take out an auto loan or a mortgage with a favorable interest rate.

To build a good credit history:

• Pay your bills on time
• Maintain low balances
• Try not to use all of your available credit
• Borrow or apply for what you need
• Don't apply for several cards or loans in a short period of time
• Check your credit report regularly for errors and potential fraud
• Keep your accounts open, active and in good standing

Following these best practices can help you improve your credit health over time.

Starting today

Remember that credit is important for many reasons. It isn't just for life's big purchases, such as a home or a car. You can also use credit to pay for college, rent an apartment, secure a credit card or get a cell phone contract. Paying for things over time can help you reach your long-term goals.

No matter where you are in life, it's never too early or too late to begin building your credit history. Don't wait to establish credit until you need it. Building your credit slowly can show lenders that you're reliable.

Key takeaways

• There are many ways to start establishing your credit history, and not all of them require you to take out a loan or open a credit card.
• A trusted friend or family member can help establish your credit by adding you as a joint account holder or co-signing a loan with you.
• Not all credit types are right for everyone. Think about your current and future needs, and make sure you understand the terms and fees of any products before applying.
• Paying your bills on time, not opening too many new accounts, and keeping your balances low can help set you on the path to building a strong credit history.