How To Start Building Credit

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By Oluwaseun Bamisile


Are you interested in learning how to start building credit? This article provides comprehensive guidance on this important financial journey.

I will start this article by discussing several reasons you should build credit. Following that, we will explore when you should embark on this journey.

Then, I will provide tips and strategies to establish credit. Meanwhile, our FAQ section offers answers to some of the most asked questions related to this article’s topic.

Why You Should Build Credit

Why You Should Build Credit

Building credit is an essential financial step for individuals and can significantly impact your financial future. Here are detailed reasons why you should build credit.

1. Lower Interest Rates

The impact of credit on interest rates cannot be overstated. Lenders often use your credit score and history to assess the risk associated with lending you money.

A higher credit score signifies responsible financial behavior and lower risk. As a result, people with good credit scores often get lower interest rates when getting a loan, as stated by

Suppose you’re applying for a loan with a credit score of 750. Meanwhile, someone else with a lower score of 600 is applying for the same loan.

The difference in interest rates could be substantial. Besides, a lower interest rate not only means lower monthly payments but also reduces the total amount you’ll pay over the life of the loan.

2. Easier Approval

Building credit not only impacts the interest rate you receive but also your likelihood of being approved for credit in the first place. As expected, lenders prefer to extend credit to individuals with a proven track record of responsible borrowing and repayment.

Without credit or with a poor credit history, you may face difficulties obtaining loans or credit cards. This can hinder your ability to make essential purchases, invest in education, or respond to unforeseen emergencies.

Additionally, being denied credit can negatively affect your credit score further, creating a cycle that becomes increasingly challenging to break. Thus, establishing and maintaining good credit can be crucial for accessing the financial resources you need when you need them.

3. Utility Services

Utility companies, like electricity, water, and gas providers, may check your credit report when you apply for their services. Hence, the better your credit record, the easier to get these services, as suggested by

In fact, your credit history can influence whether you must pay a deposit before they activate your services.

With a strong credit history, you may not need to pay a deposit or have a lower deposit requirement. This can help you manage your initial expenses when moving into a new home or setting up services in your name.

On the other hand, if you have poor or no credit, you might be subject to higher deposit amounts. This can be an inconvenience and a strain on your finances.

4. Credit Rewards and Perks

Credit cards, especially those with good credit, often have rewards programs and valuable perks. These can include cashback rewards, travel points, discounts on purchases, extended warranties, and access to exclusive events.

Credit card issuers provide these incentives to attract and retain customers with strong credit histories. By using credit responsibly and taking advantage of these benefits, you can save money and enhance your lifestyle.

For example, a cashback credit card that offers 2% cashback on all purchases can provide you with $200 in rewards for every $10,000 spent. Over time, these rewards can add up, effectively lowering your overall expenses or allowing you to enjoy certain experiences at a reduced cost.

5. Employment Opportunities

Some employers, particularly in financial responsibility roles, may review your credit report as part of their hiring process. They do this to assess your financial trustworthiness, as implied by

A strong credit record can be a positive indicator of your ability to manage financial obligations. It also suggests that you are less likely to engage in financial misconduct, such as embezzlement or fraud.

While not all employers check credit reports, having good credit can give you an advantage in a competitive job market. It also opens up opportunities for positions with financial responsibilities.

When You Should Start Building Credit

Deciding when to start building credit is a personal decision that depends on various factors, including your financial goals and responsibilities. However, several sources suggest the best time to start building credit is when you turn 18.

At that age, you can apply for a credit card or take out loans without needing a co-signer. Besides, a vital factor in achieving a good credit score is your length of credit history, according to

However, it’s crucial to have a solid understanding of financial concepts like budgeting, interest rates, and responsible credit card use. Also, ensure that you are comfortable managing your money effectively.

Moreover, building credit often involves borrowing money, which requires a stable source of income to repay debts. Whether working a part-time job or earning an allowance, having a consistent stream of money is essential to cover your financial obligations.

How To Improve Credit Score

How To Establish Credit

Building credit is a gradual process that involves responsible financial habits and actions. Here’s a detailed guide on how to build credit.

1. Become an Authorized User

The easiest and fastest way to build credit is to become an authorized user. Specifically, if you have a trusted family member or friend with a well-established credit card account, they can add you as an authorized user.

According to, authorized users have zero liability, meaning you won’t be charged for fraudulent/unauthorized transactions. Thus, this method is low-risk.

Additionally, the positive payment history of the primary cardholder is reported on your credit report, helping you build credit.

As a matter of fact, you can also get special perks and benefits for being an authorized user. However, ensure to choose someone who manages their credit responsibly, as negative actions can also affect your credit.

2. Apply for a Starter Credit Card

When you start building credit, consider applying for a starter credit card. You can either get an unsecured starter credit card or a secured starter credit card.

However, without a credit record, getting an unsecured credit card can be difficult, as hinted by Thus, it’s best to get a secured credit card.

Nonetheless, a secured credit card requires a cash deposit upfront, according to Regardless, look for secured credit cards with no annual fees and low credit limits.

In addition to that, use the card sparingly and responsibly.

3. Get A Credit-Builder Loan

Payment history is an important factor in your credit score calculation, accounting for about 35% of your credit score. Hence, getting a credit builder loan is an effective strategy for building and improving your credit.

This type of loan is specifically designed for individuals with limited or no credit history. It can also help those who have encountered credit challenges in the past.

However, this type of loan isn’t like the typical loan we all know. Basically, the lender won’t release the loan until it has been repaid.

Thus, it forces you to repay the loan before accessing it, thereby increasing your credit score due to repayment. In my opinion, it’s an indirect saving program that rewards you with credit scores.

4. Maintain Good Credit Habit

Making on-time payments is one of the most crucial aspects of maintaining good credit habits and building credit. Late payments can impact your credit score in a negative way.

Furthermore, it can remain on your credit report for several years. Hence, set up reminders or automatic payments to ensure you never miss a due date.

Besides, maintaining a low credit utilization ratio is vital for a healthy credit score. In case you’re wondering, the credit utilization ratio is the percentage of the available credit that you’re using.

As a result, aim to keep it below 30%, as suggested by For example, if you have a credit card with a $1,000 limit, keep your balance under $300.

5. Regularly Monitor Your Credit Report

Monitoring your credit reports and scores is a proactive way to ensure your credit-building efforts are on track. You can use free services, such as Credit Karma, or obtain your credit reports directly from the credit bureaus.

Regular monitoring helps you identify and dispute errors, detect potential identity theft, and track your credit score progress.

Frequently Asked Questions

1. What Is A Credit Score?

A credit score is a numerical representation of a person’s creditworthiness, which is based on their credit history and financial behavior. Lenders and creditors use credit scores to evaluate the risk of lending money to a particular borrower.

In essence, it helps them determine the likelihood that you will repay borrowed funds on time. Credit scores are typically represented as a three-digit number, ranging from around 300 to 850 in most scoring models.

The higher the score, the better the individual’s creditworthiness is considered to be.

2. How Do I Start Building Credit For The First Time?

Some ways to build credit include becoming an authorized user, getting a started credit card, and applying for a credit-builder loan. 

3. What Are The 5 Cs Of Credit?

The 5 Cs of credit are capacity, character, collateral, capital, and conditions.

4. What Age Should You Start Building Credit?

The best time to start building credit is when you turn 18.

5. What’s A Good Credit Score?

According to, a good credit score ranges from 670 to 739.


Starting to build credit is a significant financial milestone that requires careful consideration and preparation. It is a process that can open doors to numerous opportunities, from securing loans for major purchases to getting rewards and perks.

The decision of when and how to start building credit should be based on a combination of your age, financial readiness, goals, and responsibilities. Starting early, such as when you become legally eligible at 18, can provide a head start in establishing a credit history.

However, it’s equally important to ensure you possess the financial maturity and responsibility to manage credit effectively. Regardless of when you start building credit, the fundamental principles remain the same.

These include making on-time payments, avoiding excessive debt, and monitoring your credit regularly. Nonetheless, building credit takes time, and the goal is not just to accumulate a high credit score but to cultivate a history of responsible financial behavior.

We hope you found this article to be informative and useful. If it provided value to you, please consider sharing it with your friends and family on your preferred social media platforms.

For more articles on similar topics, explore our Money page.

References And Further Reading

  1. – How to Build Credit
  2. – 6 things you should do if you have no credit history
  3. – How to establish credit
  4. – Why building credit is so important, from mortgage applications to future jobs
  5. – How to build credit: 7 tips
  6. – Why Is It Important to Establish Credit When Young?
  7. – Why is good credit so important?
  8. – What Age Should You Start Building Credit?

About the Author

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Oluwaseun Bamisile

Oluwaseun is the Lead Content Editor at He holds a National Diploma in Computer Science (currently studying part-time for his Higher National Diploma). An internet geek with a love for automobiles, he writes relationship articles, travel guides, and general life hacks on the site.

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