How To Build Credit: Proven Strategies That Actually Work

Your credit score shapes your financial future. A strong score makes loans cheaper and apartments easier to rent.

Overwhelming debt can tank your credit score fast. Missing payments hurts. Late payments damage your credit even more.

You might worry about filing bankruptcy and your credit score. The good news? You can rebuild credit from any starting point.

Here are six proven ways to boost your credit score:

• Use credit cards wisely
• Prioritize on-time payments
• Keep your balances low
• Make loans work for you
• Report rent and utility payments to credit bureaus
• Celebrate wins and stay consistent

Each strategy builds on the next. You can start today.

Use Your Credit Accounts Wisely

Credit accounts help you build credit when used responsibly. Several account types can work for your situation.

A decent credit score qualifies you for regular credit cards. These unsecured cards require no collateral backing.

Rebuilding from a low score? Secured cards offer easier approval. You fund these cards yourself with a deposit.

Credit cards aren’t your only option. Many people hesitate after bad experiences with cards. You can become an authorized user on someone else’s account instead.

Get a Regular Credit Card and Use It Responsibly

Payment history drives your credit score more than any other factor. Making payments requires spending money on necessities.

Groceries, gas, and essentials belong on your credit card. Pay the balance off each month. Your credit score climbs steadily.

Follow these three rules:

• Use your card regularly
• Keep balances below 30% of your limit
• Pay on time every month, in full when possible

These habits prove you can borrow and repay reliably. Future lenders notice consistent behavior.

After bankruptcy, credit card offers flood your mailbox. Sky-high interest rates make some offers terrible. Consider secured cards or authorized user status instead.

Start With a Secured Credit Card

Secured cards require a refundable deposit, usually a few hundred dollars. Your deposit sets your credit limit.

You use the card like any regular credit card. Payment history reports to credit bureaus automatically. Over time, you’ll qualify for unsecured cards.

Banks and online lenders offer secured credit cards widely. Our partner Kikoff provides credit-building tools with no credit check required.

After bankruptcy, secured cards teach wise credit use. Keep balances low. Pay off regularly and on time.

Become an Authorized User on Someone Else’s Card

A trusted person with good credit can add you as an authorized user. Parents, partners, or close friends work well.

You don’t need to use the card to benefit. The card issuer reports activity to credit bureaus. Their positive payment history appears on your credit report.

A thin credit profile improves quickly with this strategy. Rebuilding after bankruptcy? Authorized user status provides both credit benefits and peace of mind.

Planning to use the card? Discuss usage and payment expectations clearly. Communication protects both your credit and your relationship.

Make On-Time Payments Every Time

On-time bill payments build credit faster than anything else. Payment history comprises the largest portion of your credit score.

One late payment tanks your score for years. Juggling multiple debt payments creates real financial stress.

Missing payments happens often before bankruptcy filing. Starting fresh means starting smart.

Lenders need proof you’ll pay by the due date. Consistent payments build trust over time. Your credit improves steadily.

Set up automatic payments or calendar reminders now. Paying in full works best. Making minimum payments on time beats skipping payments entirely.

Keep Your Balances Low

Credit utilization ratio ranks second in credit score calculations. How much available credit you’re using matters tremendously.

Keeping utilization low boosts your score significantly. Experts suggest using less than 30% of your total credit limit.

Aiming for 10% or less? Your score gets an extra boost.

Example: A $1,000 credit limit means keeping balances between $100 and $300. You’re staying within the 10% to 30% range.

Lenders see you’re not relying heavily on credit. Low balances also make payoff easier without interest buildup.

Make multiple payments throughout the month. Pay off charges right after they post. Regular card use won’t look maxed out when lenders report your balance.

Get a Loan That Makes Sense for You

Loans help build credit by proving responsible money management. Making loan payments on time strengthens your credit history.

Credit cards offer revolving credit. Loans provide installment credit instead.

Installment credit means fixed monthly repayments plus interest until payoff. Revolving credit lets you borrow, repay, and borrow again up to your limit.

Not all loans deserve your trust. Some cost less and work safer than others.

Common credit-building loans include:

Credit-builder loans: Small, low-risk loans for people with no credit or damaged credit. Perfect for showing consistent payments.

Personal loans: Unsecured loans for specific purposes. Best for people with steady income who need to borrow anyway.

Student loans: Long-term education loans that help younger borrowers. Consistent post-graduation payments build credit.

Auto loans: Secured loans for people needing reliable transportation. Monthly payments must fit your budget comfortably.

Credit-Builder Loans

Credit-builder loans help people improve credit scores. Loan amounts typically range from a few hundred dollars.

You make monthly payments to the lender. The lender reports payments to credit bureaus. Funds sit in a locked savings account.

After final payment, you receive the money back minus interest. The lender keeps interest as payment for the service.

Community banks, credit unions, and online lenders offer these loans. Low risk means lower interest rates than other loan types.

After bankruptcy discharge, credit-builder loans rebuild both credit and savings simultaneously.

Personal Loans

Personal loans provide lump sum money upfront. You repay in monthly installments.

These unsecured loans require no collateral. Interest rates run higher without collateral backing. Bad credit makes rates even higher.

Some people consolidate debt or cover unexpected expenses. Personal loans build credit through on-time payments.

Borrowing money just to raise your score costs too much. Choose this expensive credit-building path only when necessary.

Student Loans

Student loans finance education and build credit after graduation. Not all student loans work equally well.

Federal student loans offer lower interest rates and flexible repayment options. Private loans cost more. Private lenders forgive less when finances change.

Lenders report student loan payments to credit bureaus automatically. Already in repayment? Consistent, on-time payments strengthen credit significantly.

Taking student loans just for credit score boosts never pays off. These loans last years and balances climb high.

Auto Loans

Financing a vehicle you need can build credit over time. You must afford monthly payments comfortably.

Auto loans are installment loans. You borrow a specific amount to buy a car. Repayment happens monthly over 3 to 6 years with interest.

Payments report to credit bureaus automatically. Know your total loan and auto costs including insurance.

Bad credit? You’ll likely get approved but face high interest rates. Shop around for the best rate available.

Borrow only what you can pay each month comfortably.

Self-Report Payments to the Credit Bureaus

The current credit system favors people taking on debt. Many people without credit cards make reliable monthly payments anyway.

Rent, utilities, and phone bills count toward credit now. Services exist to make these payments boost your score.

Rent reporting tools like our partner Kikoff offer free reporting. No landlord participation required. Reports go to all three major credit bureaus: Equifax, Experian, and TransUnion.

Experian Boost, Rental Kharma, and RentReporters work similarly. No magic fixes exist. Positive information gets added to your credit file without new debt.

Celebrate the Wins and Stay Consistent

Building credit has no one-size-fits-all approach. Some strategies work better than others for your situation.

Starting small feels manageable. Choose strategies that fit your life. One or two well-used credit tools make big differences over time.

Consistent, on-time payments matter most. Celebrate your wins along the way.

Free credit monitoring tools show your progress. Don’t obsess over small fluctuations. Never tie self-worth to your score.

Your score is just a number. You’re so much more than that.

Asking for help is OK. Budgeting or managing spending feels tough sometimes. Nonprofit credit counselors can help.

Our partner Cambridge Credit Counseling offers free consultations. They create plans fitting your goals.

Check Your Credit Reports Regularly and Report Errors

Most people know their credit score but never see their actual credit report. You need to change that now.

Getting credit reports costs nothing and takes minimal effort. You’ll have more than one report.

Three major credit bureaus exist: Equifax, Experian, and TransUnion. Each keeps its own report.

Pulling your credit report won’t hurt your credit score. Looking at your credit history isn’t a hard inquiry. Your score stays unchanged.

AnnualCreditReport.com provides one free report from each bureau weekly. Spot mistakes or identity theft signs early.

Found something wrong? File a dispute directly with the credit bureau. Fixing errors helps your credit score and protects financial health long-term.

Look for these red flags:

• Late payments you actually made on time
• Unrecognized accounts signaling possible identity theft
• Outdated personal information like old addresses or employers
• Duplicate entries for the same accounts
• Incorrect account balances or credit limits
• Closed accounts marked as open
• Incorrect account status showing delinquent when current
• Unauthorized hard inquiries