Beginner's guide to start building credit
January 29, 2026 • 6 min read
Let’s start here: What is credit? The short answer is creditworthiness. It’s your reputation as someone who repays loans. This reputation is indicated by a credit score and is based on your history of borrowing funds, including the money you access from credit cards, and other financial factors like your income.
Credit can also refer to your credit limit, which is how much you’ve been approved to borrow. For this article, we’re looking at the first definition: your capacity to be a responsible borrower who has demonstrated creditworthiness.
Why is it important to start building credit in my 20s?
Good credit doesn’t come quickly. Building credit and establishing your reputation as a borrower takes time. In turn, that reputation will help open financial opportunities when needed.
A good credit score can help you rent the apartment you want by giving your landlord the security of knowing you can pay your rent on time. It can help you how credit affects when you need a loan for a car, a business or an emergency. And if someday in the future you plan on buying home, your good credit score that was earned with good habits in your younger years could help you buy the house you want with the mortgage you like best.
How do I earn credit when I don't have credit history?
Building credit means taking on the responsibility of borrowed funds. Lenders want to see signs that you understand how credit works and can use it responsibly. You can probably see the problem in this situation. You need credit history to borrow money, but you need to borrow money to establish that history. That means, in the early days when you have practically no credit, you’ll be limited in your borrowing options, but that’s OK. There are still plenty of ways to start. You can begin with a credit card or without a credit card. Here are a few options to consider.
Building credit without a credit card.
Credit cards may be the easiest and most common way to begin building credit, but you don’t have to start there. If you’re worried about high interest debt or the temptation to spend more than you should, you can begin your credit journey through other avenues.
Start a checking account.
Although this doesn’t provide a credit history, checking accounts help familiarize you with certain concepts, such as reconciling statements, balancing your account and managing your money so that you don’t overdraft. It’s a level of responsibility that will help you with the next step. In fact, many lenders require you to have a bank account before they extend credit.
Take advantage of bills, subscriptions and rent.
If you have a mobile phone or a subscription service, you’re most likely making regular monthly payments already. Or maybe you rent an apartment and you’re responsible for rent and utilities. You can now link these types of recurring bills to your credit report with services like Experian Boost and eCredable. Even though the accounts aren’t loans, they demonstrate the ability to make on-time payments.
Ask someone to be your co-signer.
Another option is to ask someone you know who has a positive credit history to co-sign a loan with you. Maybe you’re buying a car. Having a co-signer will help you get the loan you need to build your credit score and report. However, having a co-signer also means the other person is financially responsible if you fail to make your auto payments.
Building credit with a credit card.
A common way of building credit is by using a credit card. To some, this may sound scary. You may have heard stories of people being overloaded with debt and high-interest rates. But when used responsibly, credit cards can help build credit, set you up with good financial habits and add some surprising perks to your financial life. Just make sure to read the fine print — it’s not nearly as bad as it sounds when you know what to look for — and choose the right card for your lifestyle.
Still nervous? Go for a secured credit card.
You can think of a secured credit card as a prepaid credit card. A cash deposit, usually in the amount of your credit limit, is required to secure the card. This kind of card reduces the risk for the credit card company and allows you to get comfortable with these types of payments. Successfully managing a secured credit card may also increase the likelihood that the company will later offer a traditional credit card.
Become an authorized user.
Ask someone you trust who has excellent credit to list you as an authorized user on their credit account. You’ll get to share the benefits of their responsible spending habits and maybe get some practice of your own. However, this is a risky proposition for you and the person who agrees to list you. A missed payment will affect both of you.
Upgrade to a credit-building credit card.
Credit-building credit cards are traditional, non-secured credit cards — that means there’s no deposit, so your spending puts your lender at risk if you fail to pay it back. But because these cards are made for people who have little credit history, they tend to have lower-than-average credit limits. It’s a win-win situation for everyone. A low-level credit limit means you’re less likely to find yourself in outrageous debt, and your lender is less likely to lose a significant amount of money if you don’t repay.
How do I get a good credit score?
Now that you have some experience with borrowing money and paying bills, you can start thinking about your credit score. Your score is calculated from algorithms that use your credit habits as data points. They factor in how long you’ve been using credit, the type of accounts you have, the amount of debt you carry, as well as your history of making on-time payments. Here are a few tips to set up yourself up for a great credit score in the future.
Apply for credit sparingly.
Don’t go for every promotional offer you get. Applying for multiple sources of credit in a short period of time can be a red flag to lenders and lower your credit score. That’s because you may be overextending yourself with a large amount of debt. The exceptions to this rule are multiple auto loan and home loan applications. Applying for more than one auto or home loan is generally interpreted as “rate shopping” to find the best loan. After all, it would be unusual to buy more than one home or vehicle at a time.
Try to avoid closing acconts.
An old credit card is great for credit. It demonstrates your ability to have a long-term relationship with a creditor. That’s why closing an old account can temporarily ding your credit score. But that doesn’t mean you shouldn’t ever close your accounts. If you never use your card or if it has fees or is untenable for any other reason, it’s OK to close the account. Just know you’ll need some time to raise your score again.
Pay your bills on time.
This is non-negotiable. If you want to build good credit, you must pay your bills on time. Every time. And when it comes to credit cards, pay them in full when you can. This will help you avoid paying interest.
Choose diversity in credit accounts.
Don’t open multiple credit card accounts when you’re just starting. Instead, consider beginning with one credit card and then add an auto loan. In the future it may make sense to have more than one credit card, especially if you’re making payments in full every month and you want to take advantage of different reward programs. However, in the beginning stick to one card and then another type of loan. It will help your score.
Keep credit utilization low.
Don’t max out your credit cards. In fact, you want your credit utilization (the amount of credit you’ve used compared to your credit limit) to be less than 30%. For instance, if you have a $3,000 limit, you don’t want a balance that’s more than $900 at the end of the billing cycle.
Maintain a low debt-to-income ratio.
Your debt-to-income ratio carries more weight with some lenders than others. However, it’s an integral part of the information used for making credit decisions. Strive to keep your monthly debt to no more than 35% of your monthly income.
Check your credit reports regularly.
Data mistakes happen. That’s why it’s important check your credit reports frequently to ensure they display accurate information. The three major credit reporting agencies — Experian, TransUnion and Equifax — each allow you to obtain one free credit report per calendar year.