5 Steps to Establish Credit

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As soon as you start living on your own, chances are you'll quickly learn how important a solid credit score is. You'll need good credit to borrow money, whether you're applying for a credit card, mortgage or auto loan. The good news is that there are a few simple things you can do to establish credit and start moving your credit score in the right direction.


1. Find a Credit-Building Card

Your payment history is the largest part of your FICO Score, which is the score many lenders use to determine whether you're a reliable borrower. One way to build your score is to get a credit card and start using it.

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If you don't have a history, though, you might find that getting a card is tough. Look for cards that are designed specifically for building credit. You likely will be issued a fairly low credit limit, and your interest rate might be high.


Consider also:How to Get a Credit Card Without a Bank Account

2. Make Purchases With Your Card

For many consumers, the debit card acts as the central hub of all purchasing activity. But when it comes to building a credit score, a credit card is a better option. Why? Credit card issuers report your on-time payments to the credit bureaus, while debit cards simply pull funds from your bank account.


Recent activity is one of the factors affecting your credit score, so it's important to take your card out of your wallet regularly and use it. If you prefer to use your debit card for your in-person purchases, you might decide to set up some recurring subscriptions to have regular activity on the card.

3. Pay Your Bills on Time

Timely payments make all the difference when you're working to improve your credit score. One late payment can hold you back, especially if you've just started establishing credit. This doesn't just apply to your credit cards, either. It's essential to pay all your bills on time, without fail.


One of the best ways to ensure nothing falls through the cracks is to set up autopay on all your accounts. Then all you'll need to do is ensure that you have enough money to cover your bills on the designated dates. For your credit cards, you'll need to pay close attention to the minimum payments due, although you can save on interest by paying as much as possible when that bill comes due.

4. Start Saving Money

Your savings account doesn't affect your credit score directly, but it can help in other ways. By having enough in the account to cover unexpected emergencies, you'll ensure you can pay all your bills even if your budget is stretched thin. Your savings also comes into play when you apply for a home loan.


And while you're setting money aside, a retirement account is important for safeguarding your future. Your retirement savings doesn't affect your credit score, but it's still important to save for your future. If your employer matches your contributions, you'll get free money for participating in a group savings plan.

5. Regularly Check Your Score

If you don't already know your credit rating, make sure you check it as soon as possible to have a baseline. You can get one free copy of your credit report each year by going to AnnualCreditReport.com or calling ​1-877-322-8228​. First, though, check your bank's online portal since some lenders now offer free access to this information to account holders.


You also might want to monitor your credit score on an ongoing basis. If your lender or credit card issuer doesn't offer this perk, you can sign up for a service like Experian Credit Monitoring. By keeping an eye on things, you can detect fraud and erroneous reports early and dispute them to have them removed.

Consider also​: How to Get a TRW Credit Report