How to Build Credit
The easiest way to start building your credit history is to borrow a student loan and/or apply for a credit card. Federal student loans offer low-interest rates relative to other loans and many options to repay them. Student loans are installment loans which when properly managed and repaid can help build credit history and your credit score. If you decide to get a credit card, use it wisely and in accordance with your budget. While credit cards make it possible to spend money you have not yet earned, your goal is to be able to pay off your credit card in full every month to eliminate the possibility of paying any interest.
- Make student loan and credit card payments on time. 35% of your credit score comes from your history of paying bills on time. (To learn more about credit scores visit Equifax's FICO score page.)
- Use your credit sparingly, staying well within the credit limit of the account. Financial experts recommend using only 30% of an account's available credit, if possible.
- When using credit cards, only charge what you can afford to pay off in one month. Period!
- Pay off your credit card balances instead of moving debt to other credit cards. Remember: having lots of open credit card accounts can negatively impact your credit score.
- Review your credit report annually to ensure accuracy and check for fraud. You can get a free copy of your credit report once a year from each of the three major credit bureaus (Experian, Equifax, and TransUnion). If you find that you are a victim of identity fraud, use this identity fraud checklist to help navigate your next steps.