How to Build First-Time Credit


It’s an unfair association, but “bad credit” and “no credit” are often lumped into the same category. Whether you’re a young adult or simply new to the lending world, building credit is an important process. A strong score will save you money on insurance premiums and interest rates, open the door to new opportunities and even pad your bank account. Read on to learn the basics of building first-time credit. It’s easier than you think.

  1. Review your credit reports. Learning the facts is the first step to healthy credit. Unfortunately, one in five consumers has mistakes on their credit reports. The major credit bureaus—TransUnion, Experian and Equifax—house your credit information in three separate reports. The Fair Credit Reporting Act (FCRA) requires them to provide you with a free copy every year. Visit to order yours. Verify your information and highlight any mistakes listed in your personal information, e.g., name and address and account listings. Follow this process with each credit report. The bureaus are separate companies and may report varying information.
  2. Add unlisted trade-lines. In addition to highlighting mistakes, it’s important to recognize what’s missing. Accounts, also known as trade-lines, can help or hurt your score depending on their information—and their presence—within your credit reports. While you may pay them faithfully, your credit score won’t reflect it unless they are included. A few commonly unreported trade-lines include rent, utilities, extended lines of credit and cell phone service. Make a list of your accounts and make sure they appear on your reports.
  3. Follow the Five Factors. Building credit is about more than information—it’s about following the rules of scoring. Five factors determine your credit health: payment history (35 percent), amount owed (30 percent), length of credit history (15 percent), inquiries (10 percent) and account diversity (10 percent). As you can see, two of the five categories rely on history to determine their strength. With a combined weight of 50 percent, you can’t afford to waste time. Click here to learn more about the Five Factors and how to integrate them into your life.
  4. Apply for a secured credit card. If you haven’t applied for credit, a secured card is a good way to begin. This option provides you with a credit line based on a security deposit. If you want a $500 credit limit, you’ll need to deposit $500 cash before using the card. As your history increases, the lender may allow you to make smaller deposits and even convert your account to regular credit. In the meantime, your activity will be reported to the credit bureaus, allowing you to benefit from good habits.
  5. Talk to a professional. Every person has the right to repair their own credit. That said, it can be difficult without the time and knowledge needed to succeed. Consider talking to a professional as you begin your journey. A second opinion will help you choose the best path.