Building credit is a big step toward financial freedom. Whether you're aiming for your first credit card, looking to boost your credit score, or recovering from poor credit, various credit-building tools can support you. We'll walk you through methods to help build credit, good credit habits to develop, and how to set yourself up for a strong credit history.

Let's take a look at how to build and maintain strong credit to set yourself up for long-term success.

The Importance of Building Credit

Building credit is important for more than just loans and credit cards – it can impact your life in many ways. For example, a good credit score can open doors to better financial opportunities, like lower interest rates on mortgages, auto loans, and personal loans, saving you thousands of dollars over time. On the other hand, poor credit can limit your access to these benefits or lead to higher interest rates, making borrowing more difficult and expensive.

Credit can also play a role in your everyday life. Landlords often check your credit before approving a rental application. A low score might mean higher deposits or even rejecting your application. Insurance companies, especially those for auto insurance, may use your credit score to set your premium rates – better credit can mean lower rates. Some employers, especially in industries like finance, may also review your credit history as part of the hiring process because it can be seen as a reflection of your responsibility.

Besides these practical aspects, building good credit gives you more financial flexibility. For instance, if an emergency comes up and you need quick access to funds, a strong credit history can make it easier to qualify for an emergency loan or credit line. Credit cards with good terms also provide rewards and perks, like cash back or travel points, which can be valuable over time.

Building and maintaining good credit takes discipline and effort. Consistently using credit responsibly, keeping your credit utilization low, and making payments on time are key habits that not only boost your credit score but also signal to lenders that you are a low-risk borrower. Over time, this can translate to credit limit increases, better loan terms, and access to premium financial products.

How to Build Credit from Scratch

When you're starting with no credit history, it may feel like you’re stuck in a catch-22: you need credit to build credit. But you're in luck – there are ways to build credit that can help you quickly establish a good credit score. One option is a credit builder loan, typically offered by credit unions. This type of loan allows you to make monthly payments that are reported to the three credit bureaus – Experian, TransUnion and Equifax – helping you build a positive payment history.

If you're looking for other options, a secured credit card can be an excellent choice. With a secured card, you provide a refundable security deposit, which serves as your credit limit. Secured credit cards are designed for people with poor credit or no credit history, and by making on-time payments, you can establish a strong credit history – which boosts your overall credit score.

Another option is the Juzt First Digital Credit Card, which is designed for those with no or limited credit history, and may help you build credit responsibly over time. Tailored for new credit users, this credit card could help you build a solid financial foundation from day one.

Our Step-by-Step Guide to Building a Strong Credit History

Below, we’ve outlined the steps you should take to build and maintain a strong credit history.

Step One: Take a Look at Your Current Credit Report and Score

The first step in building or improving your credit is understanding your current credit status. You can get a free credit report from each of the three major credit bureaus – Experian, TransUnion and Equifax – once a year. It’s a good idea to review these reports so you can catch any errors or signs of fraudulent activity that could hurt your credit score. Many credit card companies also give you free, ongoing access to your credit score, so you can track your progress regularly.

When you're looking at your credit report, pay close attention to key areas like your personal information, open accounts and payment history. If something doesn’t look right, you should dispute it with the credit bureau as soon as possible. Also, keep an eye on your credit utilization – the amount of credit you're using compared to your total credit limit – since it plays a big role in your credit score.

How Can You Establish a Strong Credit History?

If you're starting from scratch or working to rebuild your credit, knowing where you stand now is crucial. Tools like Experian Boost can even help by adding on-time utility or streaming service payments to your credit report. And if you spot any negative marks, like late payments or accounts in collections, don’t worry – they won’t stay on your report forever. They usually drop off after about seven years. Staying on top of good credit habits like paying bills on time and responsibly managing debt can slowly but surely help boost your score.

Step Two: Consider Opening Your First Credit Card

One of the quickest and easiest ways to establish or rebuild credit is by opening a credit card account. Many credit card companies offer student credit cards or credit cards for building credit that are specifically tailored for beginners. These cards often come with low credit limits, making them a manageable way to start responsibly using credit.

To apply, compare offers from banks, credit unions or credit card issuers, focusing on cards with low or no annual fees and ones that report to all three credit bureaus – Experian, Equifax and TransUnion. Once you choose a card, you can apply online, providing your basic information like income and employment details. Once your application is approved, your card should arrive within seven to 10 days. Or – if you’d prefer to have access to your card within minutes, you can choose an option like the Juzt Digital Credit Card, which offers a digital-first approach to credit and is a sound option for first-time credit users.

Once you start using your card, make sure to keep your credit utilization low. Try to keep your credit usage below 30 percent of your available credit, as this is generally seen as favorable by lenders. For example, if you have a credit limit of $1,000, try to keep your balance below $300. Keeping a low credit card balance will also help you qualify for a credit limit increase over time.

Explore the Option of Secured Credit Cards

If you’re struggling to get approved for a traditional loan or credit card, a secured credit card is another good option. As mentioned earlier, this type of card requires you to put down a refundable security deposit, which acts as your credit limit. Using a secured card responsibly by making timely payments can help you transition to an unsecured card later on. Credit unions and smaller banks often offer secured cards, and they may have more favorable terms than larger banks or credit card companies.

Step Three: Diversify Your Credit Portfolio for Better Results

Lenders like to see a mix of credit accounts, including credit cards, personal loans and auto loans. If you have an established credit card account, consider adding a small personal loan to your portfolio to diversify your overall credit mix. This shows that you can handle multiple forms of credit responsibly, which can positively impact your credit rating.

If you're not ready for a personal loan, you might also consider a credit builder loan. These loans are designed specifically for people looking to establish credit or improve their score. By making regular loan payments, you can demonstrate that you're a responsible borrower.

Step Four: Ensure Timely Payments to Avoid Unnecessary Fees

Nothing wrecks your credit score faster than late or missed payments. Your FICO score is heavily influenced by your payment history, so making on-time payments is non-negotiable. Whether it's credit cards, utility bills, rent payments or even streaming service bills, make sure you’re paying on time to avoid unnecessary fees and keep your score from dropping.

The easiest way to make sure you never miss a payment is to set up automatic payments through your bank or the credit card company's app. You can choose to pay the full balance, the minimum payment or a set amount each month. If you’d rather manage payments manually, set reminders on your phone or calendar a few days before your payment is due.

It’s also a good idea to make payments as early as possible, especially if you carry a balance – doing this can reduce the interest charges you’ll pay. Keep an eye on your statement closing date to avoid any surprises. And if you ever find yourself short on cash, at least pay the minimum payment to avoid late fees and dings on your credit report – late or missed payments can stay on your record for up to seven years and hurt your credit score. Developing this habit now is key for maintaining a strong payment history and supporting your overall credit score.

Step Five: Make Regular Credit Report Checks a Habit

It's important to review your credit on a regular basis to make sure everything on it stays accurate. By law, you can check your Experian credit report and the reports from the other major credit bureaus once a year for free. It’s a good habit to check your reports for any errors or signs of fraud.

Who Can Provide Professional Advice for Credit Improvement?

If you’re not sure about how to improve your credit or which products to use, consider consulting with a financial advisor or credit bureau. Many credit unions also offer counseling services to help you understand the best way to build credit. Whether you’re trying to fix bad credit or you’re just getting started, having professional guidance can make a big difference in your credit journey.

Key Takeaways

Building credit doesn’t happen overnight, but with consistent effort and smart strategies, you can quickly improve your credit scores. Start by paying your bills on time, using credit responsibly, and regularly checking your credit report for accuracy. Remember, building a good credit score is a journey, and with the right tools and habits, you’ll be on a path toward building a stronger credit profile.

This article provides general information and does not constitute financial advice. For guidance specific to your situation, consider consulting a financial advisor or credit counselor.