How to Build Credit | How to Establish a Great Credit Score
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How to Build Credit

If you’re just beginning to manage your own finances, chances are, you don’t have any credit built up yet. Credit is basically the ability to purchase something before it’s paid for, based on the trust that the payment will be made in the future. Good credit is built on proving you can pay off debts. Read on to find out how to build credit and why you need it in the first place.

Why Is It Important to Build Credit?

Good credit history shows lenders that you’re responsible with your spending. This is especially important for purchasing a house or car because bad credit or no credit may cause your loan applications to be declined.

A good credit score can also be important for job-hunting because some employers will run credit reports of candidates prior to offering the position. Not only does your credit score serve as an indication of your overall reliability, but it’s especially important for positions that require employees to use a corporate credit card for business travel or other work-related expenses.

So, the question remains: how to build credit? Luckily, building credit is easier than repairing bad credit and usually only takes between 6 months and 1 year to begin showing positive results.

Follow These 5 Steps to Start Building Your Credit

Some of the steps for building credit are things you may be doing anyway, but others may not be as obvious.

1. Apply for a Credit Card

And once you get your credit card, it’s important to know how to use it properly. Here are some best practices for using your credit card wisely:

  • Always pay the balance in full
  • Don’t spend more than 30% of your credit limit

Even though many credit cards require a good credit history in order to be approved, there are student credit cards and secured credit cards that are specifically designed to be a person’s first card and are easier to obtain. Secured credit cards are even set up so that you pay a cash deposit that acts as collateral if you default on the loan. But since many of these cards have lower credit limits and higher interest, these cards are not recommended for long-term use.

If you’re not approved for a card on your own, some credit cards are set up so that authorized users can also build credit. If you’re ready to apply, check out personal credit card options from Union.

2. Obtain a Co-Signor

Similar to becoming an authorized user on someone else’s credit card, co-signing a loan with another person can help you build credit. The cosigner should have a good credit score and lengthy credit history to improve the borrower’s odds of approval. Also mention a game plan with your cosigner in the event  you can’t pay your bills.

3. Pay Rent in Full and On Time

Chances are, if you’re looking to buy your first house, you’re already paying rent of some kind. Depending on your property management company, the reliability of your rent payments may be reflected on your credit report. Always make sure to pay your rent in full and on time in order to avoid damage to your credit report.

4. Don’t Close – Or Open – Accounts Too Often

Average account age is part of your credit score. By using the same account for several years, you are showing borrowers that you can commit to one thing. Again, it’s all about proving your reliability.

Similarly, opening too many accounts at once works against your account age because it may indicate impulsiveness. Also keep in mid that checking your credit too frequently has the potential to hurt your credit score because it may appear that you’re desperately looking for credit.

5. Pay Your Student Loans

Many people have student loans—paying them on time can help boost your credit score. Basically, any type of debt that you pay on time will work towards improving your credit score because it proves that you’re responsible with your money and able to cover the costs that are expected of you.


The overall mantra to good credit practices is: don’t spend money you don’t have—don’t carry a balance on your credit card and pay off loans in a timely manner to cut down on interest. By following these simple steps, you’ll be well on your way to establishing and maintaining a great credit score.

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