How to Build Credit History

Find out how you can start building credit history even if you don’t have any credit right now.

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What is credit?

Credit is an arrangement where a borrower receives something of value now and agrees to repay the lender at a later date. The borrower also agrees to pay interest, which is the cost of borrowing the money. Lenders use credit to make a profit. There are different types of credit, but they all work in the same way.

The three types of credit

Credit comes in many forms, but there are basically three types of credit: revolving, installment, and open-end.

Revolving credit is what most people think of when they think of credit. This type of credit is typically used for short-term borrowing, such as making purchases with a credit card. The borrowed amount (also called the principal) can be paid back over time, and the creditor may allow the borrower to borrow again up to the original limit once the original amount is repaid. Most credit cards are revolving credit accounts.

Installment credit is used for larger purchases that are paid back over time in fixed payments, such as with a mortgage or car loan. The borrower repays not only the principal (the original amount borrowed) but also pays interest on the outstanding balance. Once the entire loan is repaid, the account is closed.

Open-end credit differs from installment credit in that open-end credit has no fixed repayment schedule or end date. Open-end credit is typically used for lines of credit, such as home equity lines of credit (HELOCs). With this type of account, the borrower may borrow and repay any amount up to the account’s limit, as long as minimum monthly payments are made.

How to build credit

There are several ways to build credit. You can get a credit card and use it responsibly, you can take out a loan and make all of your payments on time, or you can use a service like Credit Sesame to help you build your credit.

Credit Sesame is a free credit monitoring service that helps you track your progress and gives you personalized advice on how to improve your credit score. If you’re not sure where to start, Credit Sesame can help you find the best way to build your credit.

The importance of credit

Credit is very important in today’s world. A good credit score can help you get a loan, a mortgage, a credit card, and even a job. A bad credit score can make it difficult to get any of these things. Building credit is not difficult, but it does take time. The best way to build credit is to use credit responsibly.

The benefits of good credit

Credit is important because it is one factor that lenders look at when considering a loan. A high credit score means you’re a low-risk borrower, which could lead to a lower interest rate on a loan. A low credit score could lead to a higher interest rate and could mean you won’t be approved for a loan at all. Having good credit can also save you money on insurance premiums and security deposits.

The consequences of bad credit

Bad credit can have a number of consequences. It can make it difficult to get a loan, rent an apartment, or even get a job. In fact, employers often check credit reports as part of their hiring process.

Bad credit can also lead to higher interest rates on loans, and you may have to pay a security deposit for utilities and other services. In some cases, you may not be able to get insurance at all.

Of course, the biggest consequence of bad credit is the stress and anxiety it can cause. If you’re struggling to keep up with your bills, or you’re constantly worrying about money, it can take a toll on your mental and physical health. That’s why it’s so important to take steps to improve your credit score.

How to get started

If you’re just starting out, one of the first things you need to do is start building your credit history. A good credit history is important for several reasons. It can help you get loans for large purchases, such as a car or a house. A good credit history can also help you get lower interest rates on loans. Finally, a good credit history can help you get better insurance rates.

Secured credit cards

Probably the easiest way to start building credit is to get a secured credit card. With a secured card, you deposit money with the issuer, which becomes your credit limit. The issuer then reports your payments to the credit reporting bureaus, helping you build a good credit history. You can get a secured card even if you have bad credit.

If you have fair or good credit, you may be able to get an unsecured card, which doesn’t require a deposit. With either type of card, it’s important to make payments on time and keep your balance low relative to your credit limit (meaning don’t max out your card). Also, avoid opening too many new accounts at once; too much new credit can hurt your score.

Credit-builder loans

A credit-builder loan is a type of loan where the money is held in a savings account as collateral. The borrower makes payments on the loan, but they don’t have access to the funds until the loan is paid in full.

Credit-builder loans can help people build their credit history or improve their credit score. The loans often have low interest rates and monthly payments, which can make them more affordable than other types of loans. And, because the funds are collateralized, lenders may be more likely to approve a credit-builder loan than a traditional unsecured loan.

If you’re looking to build your credit history or improve your credit score, a credit-builder loan could be a good option for you.

Becoming an authorized user

If you’re interested in becoming an authorized user, the first step is to contact the primary cardholder and ask if they’re willing to add you to their account. If they agree, they’ll need to provide you with some basic information, including your name, address, and date of birth.

Once you have this information, you’ll need to fill out an application with the credit card issuer. This can usually be done online or over the phone. Once your application is approved, you’ll be issued a credit card with your name on it that’s linked to the primary cardholder’s account.

As an authorized user, you’ll be able to use the credit card to make purchases and help build your credit history. It’s important to note that you’re not legally responsible for repaying the debt — that’s the primary cardholder’s responsibility — but if they don’t make payments on time, it will affect your credit score as well.

How to maintain good credit

Credit is important because it is one factor that lenders look at when considering a loan.

Paying your bills on time

One of the biggest factors in your credit score is your payment history — meaning whether you pay your bills on time, every time. Payment history accounts for 35% of your FICO® Score, so it’s important to make sure you’re paying all your bills, including credit cards, utilities, rent or mortgage, and any other recurring payments, on time and in full each month.

If you have trouble remembering to pay all your bills on time, set up automatic payments through your bank or creditors. That way, you’ll never miss a payment — and you’ll avoid any late fees or penalties that can damage your credit score.

Keeping your credit utilization low

Credit utilization is the amount of your credit limit that you use, and it’s reported to credit bureaus every month. You can see your credit utilization on your credit report, and lenders will use it as one factor in evaluating your creditworthiness.

Many experts recommend that you keep your credit utilization below 30% to maintain a good credit score. In general, the lower your credit utilization, the better. If you have a high balance on a card with a low limit, that will hurt your score more than if you have a low balance on a card with a high limit.

There are a few ways you can lower your credit utilization:
-Pay down your balances: The easiest way to lower your credit utilization is to pay down your balances. If you can’t pay them off completely, try to pay more than the minimum each month.
-Request a higher credit limit: Another way to lower your credit utilization is to request a higher credit limit from your lender. This can be especially helpful if you’ve been using a high percentage of your available credit for a long time.
-Spread out your balances: If you have multiple cards, try to spread out your balances so that no one card has a high balance relative to its limit. This can help improve your score in two ways: it lowers your overall credit utilization and it helps prevent maxing out any one card, which is considered negative behavior by lenders.

Reviewing your credit report regularly

Your credit report is a record of your credit history. It includes information about the type of credit accounts you have, your repayment history, and any legal actions that have been taken against you. You can get a free copy of your credit report from each of the three major credit reporting bureaus—Equifax, Experian, and TransUnion—once a year at

It’s important to review your credit report regularly to make sure that the information it contains is accurate. If you find any errors, you can file a dispute with the credit bureau to have them corrected. You should also keep an eye out for signs of identity theft, such as unfamiliar accounts or activity on your account that you don’t recognize.

If you find anything on your credit report that needs to be fixed, take steps to correct it as soon as possible. This will help improve your credit score and make it easier to get approved for loans and other lines of credit in the future.

What to do if you have bad credit

If you have bad credit, there are a few things you can do to improve your credit score. One thing you can do is to make sure you make all of your payments on time. This includes credit card payments, mortgage payments, and any other type of loan you may have. Another thing you can do is to keep your balances low. This means that you should try to keep the amount of money you owe on your credit cards below 30% of your credit limit.

Review your credit report for errors

You’re entitled to one free copy of your credit report every 12 months from each of the three nationwide credit reporting companies. Order online from, the only authorized website for free credit reports, or call 1-877-322-8228. You will need to provide your name, address, social security number, and date of birth to verify your identity.

If you find any errors on your credit report, you can file a dispute with the credit reporting company online or by mail. Include a copy of the report with the error highlighted, along with a letter explaining why you believe the information is incorrect, and a copy of any documentation you have to support your claim. Send your dispute by certified mail with “return receipt requested” so you can document what the credit reporting company received and when.

If the error is not corrected after an investigation by the credit reporting company, you can ask that a corrected version of your report be sent to anyone who received your report in the past six months (or two years if you are facing employment action based on the errors). You can also request that they send a notice of the correction to anyone who received your report in the future.

Create a plan to pay off your debt

If you’re buried in high-interest credit card debt, you’re probably feeling overwhelmed. But you don’t have to stay stuck in payments you can’t afford for the next decade.

Creating a plan to pay off your debt is the first step to getting out of the hole. The goal is to come up with a strategy that will allow you to pay off your debt in three to five years.

First, take a close look at your budget and figure out how much money you can realistically allocate to your debt each month. Then, find ways to free up additional money by trimming expenses and increasing your income. Once you have a solid plan in place, stick to it!

Paying off debt is not easy, but it is possible with discipline and perseverance. With a little effort, you can be debt-free and on your way to a bright financial future.

Consider credit counseling

If you’re having trouble making payments on time or you’re already behind on your bills, credit counseling can help. A credit counselor will work with you to create a budget and come up with a repayment plan that fits your financial situation. Many credit counseling services are free, but some charge fees. Be sure to check with your credit counseling service before you sign up.

Credit counseling won’t improve your credit score, but it can help you get back on track financially. And, if you make all your payments on time and stick to your budget, it can show future lenders that you’re serious about managing your money.

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