How to Build Credit: The Complete Beginner’s Guide

Updated November 2025

Your credit score – a three-digit number that reflects your creditworthiness – has a major impact on your finances. Improving your score can help unlock opportunities like better loan terms, premium credit cards, and more desirable housing. Luckily, improving your score isn’t necessarily hard. It just requires consistency. This comprehensive beginner’s guide will break down how to build credit step by step.

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Considering ways to build your credit? MoneyLion helps you find credit-building tools from our trusted partners. 

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Understanding your credit score 

Your credit score is a three-digit number ranging from 300 to 850 that reflects your creditworthiness based on your financial history. Lenders use this score to evaluate how likely you are to repay borrowed money on time, which impacts whether or not you’re approved for financial products. 

The higher your score, the better chance you have of getting approved for products like:

1. Credit cards
2. Mortgages
3. Auto loans
4. Apartment rentals

A better score can also help you secure lower interest rates, which helps you save money when taking out a loan.

Credit scores are determined by three credit bureaus: Equifax, Experian, and TransUnion. These companies collect information on you and use it to create your credit profile, which lenders can then view to determine whether or not to lend you money. 

Credit bureaus examine five key factors when determining your score:

Factor	Weight	Description
Payment History	35%	Record of on-time vs. late payments for bills or credit accounts. Lenders usually like to see consistent, on-time payments.
Credit Utilization	30%	Percentage of available credit currently used. Lenders usually like to see that you don’t currently owe lots of money to other lenders.
Length of Credit History	15%	How long you’ve had credit accounts. Lenders usually like to see that you’ve had your accounts for a long time.
Types of Credit Used	10%	Mix of credit cards, loans, and other accounts. Lenders typically like to see that you have a mix of credit accounts.
New Credit Inquiries	10%	Recent applications for new credit.  Lenders usually don’t like it when you’ve opened too many lines of credit too quickly.

Your credit information is also compiled into a credit report, which contains your personal information, credit accounts, public records, collection items, and credit inquiries. This report is protected by the Fair Credit Reporting Act, which gives you rights to access and dispute any mistakes. 

👉 What’s the Difference Between a Credit Score and a Credit Report
👉 How are Credit Scores Calculated?
👉 What Affects Your Credit Score?

Opening your first credit account 

The journey to building credit begins with opening your first credit account. 

For beginners, this typically means choosing between a secured credit card or a credit-builder loan – two tools designed to help establish your credit history safely.

1. Secured credit card: This is a credit card designed to help you build credit. It requires a refundable security deposit that acts as your credit limit. For example, if you pay a $200 deposit, you’ll usually receive a $200 credit limit. Then, you can use your card, pay it off, and have your payments reported to credit bureaus, helping to build your score.

2. Credit-builder loans: Small loans where the borrowed funds are held in an account until you finish making payments, then released to you. Each payment is reported to credit bureaus, helping establish your payment history.

You can also explore membership programs, like MoneyLion’s Credit Builder Plus. This program is dedicated to helping build your credit health, primarily through the Credit Builder Loan, which has helped more than half of members raise their score by up to 27 points within the first 60 days!¹

In some cases, you may be able to get approved for a regular credit card that’s designed for beginners. Regardless of whether you get approved for a secured card or a regular credit card, the following strategies remain the same.

👉 7 Best Secured Credit Cards to Start Building Credit
👉 Best Credit Cards for No Credit

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MoneyLion can help you explore a wide variety of credit card options designed to help you build credit. 

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Making timely payments

Payment history carries the most weight in your credit score calculation, accounting for 35% of the total. This means consistent, on-time payments are one of the most important habits for building strong credit.

Your payment history is the record of whether you’ve paid your bills on time or late, and this information stays on your credit report for years. Even one missed payment that’s more than 30 days overdue can significantly damage your score, especially when you’re just starting to build credit.

Here are 3 steps you can take to ensure you never miss a payment:

1. Set up automatic payments that will at least cover the minimum amount due
2. Use calendar reminders or smartphone alerts for due dates
3. Consider paying credit card bills frequently to keep balances low

Remember, payment history applies to all your bills, not just credit cards. While utility and phone bills typically don’t appear on credit reports unless they go to collections, establishing good payment habits across all your obligations builds the discipline needed for credit success.

👉 Statement Balance vs Current Balance
👉 How to Build Credit with a Credit Card

Managing credit utilization

Credit utilization – the percentage of your available credit that you’re currently using – is the second most important factor in your credit score. Experts recommend keeping your utilization under 30%, but lower is even better for your score.

Here’s how it works: If you have a credit card with a $1,000 limit, you should aim to keep your balance below $300 at all times (30% of $1,000 = $300). However, the ideal utilization rate is usually much lower, around 10% or less, for the best scores.

To manage your credit utilization effectively:

• Monitor your balances regularly throughout the month
• Pay down high balances quickly to see faster credit score improvement
• Make payments before your statement closing date to reduce reported balances
• Consider requesting credit limit increases as your credit improves

Many experts recommend that you avoid using all your available credit, even if you pay it off monthly. Credit card companies typically report your statement balance to credit bureaus, so a high balance at statement time can hurt your score regardless of whether you pay it off.

Utilization rate	Credit score impact
0-10%	Excellent impact
11-30%	Good impact
31-50%	Fair impact
51-70%	Poor impact
71-100%	Very poor impact

Becoming an authorized user

Becoming an authorized user on someone else’s credit card account can be an effective way to build credit, especially for young adults or those new to credit. This strategy lets you “piggyback” on another person’s positive credit behavior.

When you’re added as an authorized user, the account’s payment history and credit utilization typically appear on your credit report as well. This means you can benefit from the primary user’s responsible credit habits without being legally responsible for the debt.

For maximum benefit, ensure the primary user:

• Has a strong payment history with no late payments
• Maintains low credit utilization
• Has had the account open for several years

The payments and balances for the card will appear on your credit report, supporting score growth. However, verify with the credit card company that they report authorized user activity to all three major credit bureaus, as some may not.

This strategy works particularly well for family members helping young adults establish credit, but it requires trust and communication between both parties about spending and payment responsibilities.

If a family member or close friend has good credit, consider asking them to add you as an authorized user on one of their credit cards.

Their positive payment history can boost your credit profile, so this is a bit like asking a friend to refer you for an interview at their job. You can get a small boost by using their good reputation.

Use this strategy with caution: The primary user is still responsible for any debt that’s racked up on the card, so it’s a good idea to really talk things through before tying your financial futures together.

👉 What is an Authorized User?

Monitoring your credit report and score 

Monitoring your credit report and score is essential for effectively building credit and protecting yourself from errors or fraud.

Reviewing your credit report

It’s a smart idea to get a copy of your credit report and review it for errors. 

You’re legally entitled to one free copy of your credit report each year, from each of the 3 major credit bureaus: Experian, Equifax, and TransUnion. To get your report, just visit AnnualCreditReport.com, the only federally authorized source for free credit reports.

When reviewing your credit report, look for mistakes like:

• Incorrect personal information
• Accounts you didn’t open
• Payments marked as late when you paid on time
• Accounts showing incorrect balances or credit limits
• Old negative information that should have been removed

If you find errors, dispute them immediately by submitting claims to both the credit bureau as well as the original data provider (usually your bank or credit card company). 

Tracking your credit score

Keeping an eye on your credit score is a bit easier. 

You can explore many different credit monitoring tools that provide regular updates on your score and report changes. Many banks, credit card companies, and services like MoneyLion offer free credit monitoring as part of their services. For example, MoneyLion helps you:

1. Monitor your credit: Leverage easy, free tools designed to help protect and monitor your credit.
2. Stay in control: Get real-time alerts on any updates and changes that can impact your credit.
3. Receive tips: Get personalized tips and solutions to help build, improve, and maintain your credit health.

Tracking your progress is critical because, if you don’t check in, then you won’t know if all your work is actually generating results. 

👉 8 Best Credit Score Apps

Tips for building credit fast

While building credit takes time, certain strategies can accelerate your progress significantly. The key is focusing on the factors that have the biggest impact on your score.

For example, since credit utilization accounts for 30% of your score, reducing high balances will usually result in rapid improvements to your score.

You may also want to limit the number of credit accounts you apply to during your credit-building phase. Too many hard inquiries in a short period can temporarily drop your score and signal to lenders that you might be overextending yourself financially.

Consider making multiple payments per month to reduce your statement balances and improve reported utilization. This strategy can be particularly effective if you use your credit card for daily expenses.

Here are a few steps you can take to help give your credit a quick boost:

1. Lower existing balances to below 30% of credit limits, ideally under 10%
2. Pay every bill on time without exception
3. Avoid opening multiple new accounts within a short timeframe
4. Keep old accounts open to maintain a good credit history length
5. Use credit regularly but responsibly to show active management

Remember, while these strategies can accelerate improvement, sustainable credit building requires consistent habits over time.

How long does it take to build credit? 

The time it takes to build or rebuild your credit depends on a few factors, such as the current state of your credit, the credit-building remedies you’re using, and how long you’ve been chipping away. While there’s no exact timeline, here are some estimates:

• 30 to 45 days: You’ll likely see slight improvements 
• 6 to 12 months: You’ll likely see significant improvements

It also depends on what’s on your credit report. For example, items like late payments, bankruptcies, or collections can stay on your report for 7 years. If you have any of these in your report, then it might take longer for your report to show progress.

On the other hand, if your credit score is fairly low because you’re only 20 years old and haven’t built up a credit history yet, then you might be able to build credit faster. 

👉 How to Get Bankruptcy Off Your Credit Report Early
👉 How Long Does it Take to Rebuild Credit
👉 How to Raise Your Credit Score by 200 Points

Developing good credit habits for long-term success

Building credit isn’t just about reaching a good score – it’s about developing financial habits that will serve you throughout your life. The behaviors that build credit are the same ones that support overall financial health.

Always prioritize paying bills on time, as this single habit has the greatest impact on your credit score and demonstrates reliability to future lenders. It’s also a good idea to keep your credit utilization consistently low, even when you’re not actively trying to improve your score.

Review your credit report regularly, at least once a year, but ideally more frequently during your credit-building phase. This helps you catch errors early and monitor your progress toward your credit goals.

Develop strong budgeting and debt management skills to ensure you can always meet your payment obligations. Building credit requires spending within your means and avoiding the temptation to max out credit cards or take on more debt than you can handle.

Set specific financial goals and use digital tools to stay on track. Whether it’s reaching a certain credit score, qualifying for a mortgage, or simply maintaining excellent credit, having clear objectives helps motivate consistent behavior.

👉 How to Improve Your Credit Score: 10 Tips & Advice

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