How To Build Credit:

The Definitive Guide for 2019

Figuring out how to build your credit can be confusing, and there seems to be a ton of information to go through.

But, what if I told you that:

You can build your credit profile and score on your own and that once you understand the process it is easy to repeat and almost everything stays the same.

In this post today, I will go over how to establish your credit, the different parts of credit, and how to grow it fast in the beginning and how to manage it over time. 

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What Is Credit?

The textbook definition of credit according to Experian, is  borrowed money that you can use to purchase goods and services when you need them.

You get credit from a credit grantor, whom you agree to pay back the amount you spent, plus applicable finance charges, at an agreed-upon time.

Now while this is the accurate definition, it still doesn't quite explain it to you in "Plain English.

In "Plain English" - Credit is money that someone (like a credit card company) lets you borrow to buy things that you may or may not need. 

To borrow the money, however, you must promise you will pay them back, on-time, and sometimes with interest. 

It is essential to understand that credit is all about your level of responsibility and reputation. 

You are giving your "Word" that you will pay back whatever you borrow.

There are four types of credit that you can borrow:

Revolving Credit

Revolving credit works how it sounds, it gives you the ability to "revolve" your debt.

Let's say you are given a set credit limit like ($15,000) and you spend the full amount.

With revolving credit you get to pay a much lower monthly fee and carry the balance monthly until you have paid back the entire amount.

This gives you the ability not to have to worry about paying the entire balance in 30 days. Almost all credit cards are a type of revolving credit.

You also can continue to use the card once you have paid the balance down.

Charge Cards

These cards look the same as traditional revolving credit cards and are used in precisely the same way; however, the difference comes in when it's time to pay up, you only have 30 days to pay the full amount.

Let's use the same example from above, you have a $15,000 credit limit that you maxed out on your charge card, you will only have to the next billing cycle (usually 30 days) to pay this balance in full, or it will be considered late.

You also get to continue to use the charge card once you have paid the balance down.

Installment Credit

Installment credit is a bit different from the above types of credit in it is only a one-time use product, you get a set amount (like $15,000), and you are given a payment schedule.

This schedule will show you how much you need to pay over a set period to pay back the money, once the installment is paid back, that is the end of the agreement.

A car loan, personal loan, and a mortgage are examples of installment credit.

Service Credit

Service credit is less thought about than the other types of credit.

However, things like your Netflix Account, Amazon Prime, your electric bill, or cell phone plan are all types of service credit.

Most service credit items do not report to the credit bureaus so they won't be on your credit history.

However, very recently, companies are taking a stand and trying to get utilities and services included on your credit report to help your score.

Now that we have discussed the type of credit let's look into who the primary credit bureaus are.

What Are Credit Bureaus?

When you apply for any type of loan, get approved, and use your credit, the places that are keeping track of this process are called the credit bureaus.

Think of them as the third party that is holding you accountable for giving your word to a lender.

The collection of people you have borrowed money from and how you have managed that borrowed money is your credit report.

what are credit bureaus

Several sites allow you to check your credit; however, all of their data is pulled from the credit bureaus.

While the primary bureaus are ExperianEquifax, and Transunion, others exist such as Early Warning Services.​

I first heard about Early Warning Services when I opened my account with USAA.

There is also Chexsystems, they collect information on your checking account applications, the opening of accounts and closure along with the reason for the closure.

Almost every bank will run this check to make sure you don't owe money to another bank before they open an account for you. 

The Consumer Financial Protection Bureau has a complete list of credit reporting agencies here (PDF)

Credit Lingo You MUST Know

Before you can start building or establishing your credit, there are a few terms that you need to know about and you also need to understand how they work to get the most out of building your credit.

What Is A Credit Report?

Your credit report is like a report card, but instead of showing grades, it gives you and potential lenders an overall picture of your reputation and responsibility with other lenders.

This report is going to show several things like: 

All Of Your Accounts - You can view all of your accounts that are open or closed on your report.

Account Balances - You can see any balances you owe.

Credit Limits - It will show all of the credit limits for each account.

Your Payment History - It will show if your payments are on-time or if they are late.

Average Age Of Accounts - This shows lenders how long you have been using your credit. 

Hard & Soft Inquiries - A list of anyone who has pulled your credit report.

Below is a quick shot of how a credit report looks:

how to build credit

You can review the entire sample report here (PDF)

What Is Your Credit Score?

Your credit score is a numeric number between 300 and 850 or 250 and 900 depending on the scoring model being used that is determined by your credit report.

The most important credit score in 2019 is going to be your FICO score, this score was created by Fair Issac Corporation and is used by over 90% of all lenders.

This means that if you are looking at a credit score that doesn't explicitly say it is a FICO score, then it's pretty useless.

To be on the safe side, you can just go to

Now, I don't mean to offend the other scoring models, but lenders don't use them.

This means if you use Credit Karma and get your credit score, it won't be the same score as your FICO score.

While you think you have a 650 credit score, the ones the lender will see could show you have a 600 FICO credit score.

A lower score is going to mean completely different lending terms when it comes to credit.

Below is a breakdown of the critical factors that make up a score:

Credit Score Components by Percentage

The above chart shows you what the most critical factors are on your credit report that will make up your credit score.

As you can see, Payment History and Credit Utilization are the most critical factors and the ones you can most control.

What Is Credit Utilization?

Credit utilization is all about how much of your credit you are using compared to how much is available. 

When it comes to credit, the lower the utilization being reported on your credit report, the better.

For example: 

If your first credit card has a $1,000 limit and you haven't used it, your credit utilization for that card is 0%.

credit utilization

If you spend $500 of the $1,000, then your credit utilization is now 50%.

It is recommended that you keep your utilization for both your cards and complete credit profile below 30%.

Remember, this is a significant factor in building your credit score and much easier to manage if you build some residual income.

What's A Credit Inquiry?

Whenever you apply for new credit and potential lenders requests or pulls your credit report and score, an inquiry is added to your report.

There are 2 types of Inquiries, a "soft pull" and a "hard pull."

Hard Pull inquiries - show who you requested credit from and when you asked for the credit.

These "pulls" will affect your credit score if you get too many and they can take up to 2 years to fall off your report.

Soft Pull Inquiries - allow someone to review your credit report without it actually hurting your credit score.

Think of things like a background check, auto or home insurance even some credit cards do soft pulls.

Hard inquiries are used to let lenders know if you are asking for credit from too many places at 1 time.

Some companies will not lend you credit if you have more than 3 hard inquiries in the same month.

Soft pull inquiries are ignored and not shown to lenders that pull your credit report.

What Are Collections?

If you are unable to pay your bill and your account is closed due to non-payment, your debt is probably going to be sold off to a collection agency (CA).

These agencies exist solely to collect the money that was owed to your original creditor (OC).

Some of these collection agencies are run by the original creditor, but most of them have just purchased your debt.

When the collection agency has your account, they can place it on your report showing that you still owe money on a closed account.

Collections are bad news, so be sure to pay your bills on time.

What's Credit Monitoring?

The one thing about credit is that it needs to be continually looked after, and that is where credit monitoring comes into play.

Credit monitoring will alert you to any changes in either your credit report or to your score.

This gives you the ability to stay on top of any type of identity theft that could happen.

Monitoring also allows you to keep an updated copy of your credit report so that you can review it.

Knowing what is going on with your credit at all times is essential to making sure it grows.

What Is An Authorized User?

When you apply for a credit card, they usually ask if you want anyone else to have a card, that person would be an authorized user.

It is someone who didn't apply for the credit card with you, but you want them to have access to the credit and to have their own card.

They won't be financially responsible for the debt, however, and the credit card will show up on their credit report.

What Is A Dispute?

Whenever there is something on your credit that is inaccurate, you can dispute it.

Think of a dispute as to your way to defend yourself if a creditor puts incorrect information on your credit report.

You can dispute any item on your credit report at any time.

These investigations usually last no more than 30 days before the credit reporting agencies come back with an answer.

The answers will either be the removal or correction of the item you disputed.


The verification from the lender that the item was accurate on your report, and there will be no changes.

If it doesn't look right or if you don't remember it; Dispute It!

What's Credit Mix?

Your credit mix is simply having different types of credit on your credit report, these can include:

  • Credit Cards
  • Installment Loans
  • Mortgages
  • Auto Loans
  • Merchandise Accounts
  • Store Credit Cards

When you have several of these accounts on your credit report it is considered to have a good credit mix.

How To Establish Credit & Credit Scores

Now that you have a better understanding of what credit is, and a few terms that you need to use your credit, it is time to discuss establishing your credit.

While the steps are straightforward, the process can be confusing, so I will break things down for you below:

Do You Have A Credit Report?

Before you can establish any type of credit, you must first find out if you even have a credit report on file and what contents are on that report.

Believe it or not, but if you have never used your credit for anything, you might not have one, and that is perfectly fine.

There are a ton of places online where you can check your credit reports for free, but you need to be sure to check all 3.

You can get all 3 full credit reports for free 1 time a year at Annual Credit Reports.

You will need to create an account with each of the 3 credit reporting agencies and verify some necessary information before you can get access to your free credit reports.

If You Don't Have A Report

If you don't have a credit report, then you need to go and apply for your first account more commonly known as a tradeline.  

Mainly because there is nothing for you or any creditor to review.

If you Do Have A Report

If you do have a credit report on file, then you need to review it and see if there is anything on it that shouldn't be there such as:

  • Incorrect Spellings Of Your Name
  • Wrong or Old Mailing Addresses
  • Any Accounts You Don't Remember Opening
  • If There Are Any Collections On Your Report

You are probably thinking that if you haven't used your credit, then nothing should be on it.

However, parents have been known to use their child's credit way before they can use it, so it's better to be safe than sorry when reviewing your report.

If there is anything out of place on your reports, then you need to file a dispute.

If everything looks great, it is time for you to apply for your first tradeline or multiple tradelines.

Apply For Your First Tradeline(s)

Submitting your first application for a credit card or other type of tradeline can be exciting.

This excitement could easily cause you to go on what we call an "app spree," this is where you apply for as many cards as fast as possible in one sitting.

But I beg you to apply for no more than 3 accounts on your first go around.

This is because you need to learn how the entire process of managing credit works, and you don't need to have access to too much credit from day one.

There are several products you can apply for such as an unsecured credit card, a student credit card, or a secured credit card.

A secured credit card is a card that is "secured" by a deposit from you (usually $200 minimum), whatever you deposit, that amount will become your credit limit.

An unsecured credit card is one that you don't have to secure with a deposit, and the card is sent to you upon approval.

Below we go over the differences between a secured and unsecured card:

Secured Vs Unsecured Credit Cards

Secured Card

  • High APR
  • Usually An Annual Fee
  • Security Deposit Required
  • Manually Increase Credit Limit
  • No Rewards or Cash Back Programs
  • Low Credit Score Is Acceptable

Unsecured Card

  • Usually No Annual Fee
  • APR Based On Your Credit
  • No Security Deposit Required
  • Rewards & Cash Back Programs
  • Automatic Increase To Credit Limit
  • Average Credit Score Required

Student Credit Cards

If you are a student, then your best bet will be to check out a student credit card.

These are cards focused on people with no credit history that are currently students, you will find it much easier to get approved for this type of credit.

Especially if you currently don't have any credit at all.

Pay Your Bills On - Time

Once your cards arrive, you are going to want to start using them.

This makes perfect sense, and you should use them; however, you need to make sure you pay the bills on time.

Remember, while most credit cards are revolving types of credit, some cards can be charge cards, so be sure you know what kind of card you are applying for.

Your bill will come with a due date as well as how much will be due, under no circumstances are you to allow yourself to miss this date.

Paying your bill on time is crucial to building credit.

Monitor Your Report For 30 Days

It can take up to 30 days from the time you receive the card for it to actually show up on your credit report.

Because of this, you want to monitor for all changes on your report constantly, usually, these alerts can tell you when the new credit item was added to your report.

Give everything 30 days to get on your credit report and then start checking to see if you have an actual credit score yet.

Request A Credit Limit Increase in 60 Days (Soft Pull Only)

One place where I see many people fail is that they don't ask for credit limit increases... ever.

This is a horrible mistake because you are leaving a ton of good credit on the table.

You only want to request this increase from companies that tell you an increase will be a soft credit pull.

When you increase your credit limits, you immediately decrease your credit utilization and get a new limit reported to your credit report.

You also don't have to worry about hurting your average age of accounts.

Repeat The Process & Wait

If you are wondering "what's the catch" there isn't any, building your credit is a straightforward process, but sometimes we make it complicated by doing what we want to do vs. what we should do.

All you need to do is repeat the above process 2 times per year, and you will see your credit profile grow along with your credit score.

Below we discuss how to put this process in overdrive and see immediate results.

How To Build Your Credit & Credit Score Fast

To make sure we are all on the same page, let me first say that the fastest you can build your credit is in 30-day time slots.

There isn't anything or anyone that can build your credit faster than that, and this is because the creditors only report once per month to the credit reporting agencies about your real account.

Below are some steps to use to build your credit fast:

Keep A Low Credit Utilization

Credit Utilization plays a significant role in your overall credit profile and credit score.

The more credit you use, the more the lenders start to worry you are going down a rabbits hole.

Some credit card companies will give you a credit limit decrease if your credit utilization becomes too high on other accounts.

The best way to keep utilization low is only to use your credit card to buy small things and then pay them off immediately.

Be sure that you are below 15% total credit utilization and that no single account has utilization of over 30 percent.

Apply For Multiple Accounts At 1 Time

So, your credit profile is going to need multiple accounts and also a mix of credit.

To hit the ground running, you need to apply for different types of accounts. 

You want to look into checking lines of credit, store cards, credit builder loans, and merchant accounts to give yourself a healthy credit mix.

multiple credit accounts

Become An Authorized User

This strategy will probably give you some fantastic results fast.

If you have someone that you know that is responsible with their credit such as a parent or a brother, ask them to make you an authorized user on their best account.

Be sure they know that you don't need access to the credit card, you would like for it to report on your credit.

Our Co-founder Mark was placed on his brother's card as an authorized user and saw over a 100 point increase.

If you know anyone who is responsible enough, then take them up on it.

Don’t Buy A House Or Car

If you are trying to build your credit to buy a house or a car I am going to say pump on the breaks for at least 1 year.

You will be able to go into the deal with better loan terms and a more stable credit profile.

With my husband being a real estate broker, I have seen when a customer is approved for a loan but later not qualify.

Primarily because they used their credit for something like a car or furniture before the closing date and then lost their home.

This is because lenders pull your credit for the pre-approval and right before the closing, using your credit can only hurt you at that time.

Also, if you do buy a home or car, that enormous amount of debt hitting your credit report at one time is going to tank your credit score.

Request Credit Limit Increases Faster (Soft Pulls Only)

I can't stress this enough, to make sure your profile is growing you need to request credit limit increases.

A credit limit increase is much better than trying to get approved for another credit card at a higher amount.

If you follow these steps, within 30 to 60 days, you should see a massive change in your profile.

We challenge you to join our Co-founder Mark in our Free 30 Day Credit Sprint.

How Long Does It Take To Build Credit

How long it takes you to build your credit is going to depend heavily on your goals and what it is that you are trying to obtain with credit.

When you do anything such as adding new tradelines or paying down a bill, it still will take 30 days for it to be updated to your credit report.

Below is a timeline to give you an idea of how long it can take to build credit

30 Days

During the first 30 days of establishing your credit don't expect to see anything.

Most of your accounts still wouldn't have hit your credit report, and you probably don't have a credit score.

You will have a few inquiries on your account immediately, and those will hurt you in the short term.

Once your first 30 days are up, you will start to see a change in your credit profile.

60 Days

At the 60 day mark, all of the accounts you applied for should be on your credit report, and you should also have a credit score established.

This score might not be high starting out, but that is perfectly fine, we are going to build it up.

As long as you have paid your bills on time and kept your utilization low, you should be able to qualify for some sort of credit limit increase with a soft pull.

90 Days

After 90 days you really can start to see your credit report & score take off because you probably have higher credit limits, your accounts have aged for 90 days, and you are still paying your bills on time.

6 Months

If you haven't done any credit limit increases, at the 6-month mark, you definitely need to be requesting one.

You are probably going to see your score has increased drastically as long as you are keeping your credit utilization low, and paying bills on time.

1 Year

After your accounts have aged for 1 year and you have kept up with reasonable payments, made a few credit limit increase requests and kept your utilization low, your score will be substantial.

After 1 year, your next goal should be to add more tradelines, over 20 is the suggested amount of accounts to have.

Your initial credit inquiries would no longer be counted in your FICO score after the first year either.

However, they will still show up on your credit report.

You should also be able to qualify for that car or that home based on your credit profile.

If you don't mess up, your credit will keep going up and getting stronger. 

Time Is The Only Constant

So, to be perfectly honest, in about 1 to 2 years if you follow the outlined steps above, you will have a firm credit profile and score.

The one thing you can't change in the credit space is how fast something will update so once you have done the work, you just have to hurry up and wait.

How To Build Credit Without A Credit Card?

When looking into building your credit, credit cards have been one of the go-to staples.

However, there are other options that you should consider outside of credit cards start building your credit.

We list some other alternatives below that will work great for building credit:

Credit Builder Loans

Credit builder loans are one of the newest ways to obtain and build credit without a credit card.

The way they work is that you will take out an installment loan for a specific amount.

However, instead of the loan being given to you, it will be put into a secured account, and you will need to pay it down.

Once you have paid the installment loan down, all of the funds will be sent back to you.

During the process, as you make on-time payments, this loan and the payments will be reported to all 3 credit reporting agencies.

I only pay $29 per month for my credit builder loan over 2 years for a $500 loan.

These payments are deducted monthly from my bank account and reported to my credit reports every month showing a good payment history.

There was a $9.00 startup fee and then the $29.00 per month, which is much more affordable than $200 for a secured card.

I obtained my credit builder loan from
Self Lender, they have one the best on the market, and you can read our Self Lender Review for yourself if you would like.

Merchandise Accounts

Merchandise accounts are similar to store cards in that you can only use the credit limit you are given to purchase items from that merchant.

The best thing about these accounts is that you can use them to buy items you would typically purchase daily.

This credit account is also much easier to qualify for and will report to all three credit bureaus.

The only drawback to this account is that it will pull your credit so you will get an inquiry and the fees for purchasing an item can be a bit high.

However, it doesn’t cost a penny to get one of these accounts.

I got my first Merchandise account through
Fingerhut, one of the most extensive and most accessible store accounts to set up.

They have millions of products you can buy, and they have 2 options for credit, so there is almost no way of being denied some type of loan.

You should check out my complete
Fingerhut credit card account review if you want the exact details on how it all works.

A Line Of Credit

You should also look into what is known as a checking line of credit.

This is a revolving line of credit that is attached to your checking and savings account to protect you against overdrafts and to use like cash.

These limits can be up to $50,000 depending on the lender and even though you don't get a card, you can transfer the funds from your line of credit directly into your checking or savings account.

How To Maintain Your New Credit

Credit monitoring is going to be the most essential part of this entire journey.

The only way you can maintain your new credit is if you are always in the state of monitoring it and being alert about anything that happens with it.

Don't stray from the path of only using the credit that you need and paying it off as fast as possible.

I personally believe credit should be used for only 3 reasons:


This goes without saying, but if you have an emergency, then using credit is the best thing you can do.

It allows you to keep your cash on hand and will enable you to float expenses over a set timeframe.

While you definitely need to have a savings nest egg for emergencies that isn't always the case, having credit to lean on in an emergency is a great option.

Just remember to make your payments on time.

Points / Cash Back

While this article doesn't talk much about rewards points, they will become a vital part of your credit card journey as your credit grows.

Some credit cards have reward points and cash back that can be traded in for things like flight credits and free nights at a hotel.

My husband won't let me buy anything unless I am using a card that gets the right amount of rewards points.

The only time you should use this method is if you have the cash in the bank to pay off whatever item you purchase.

For instance, you need to buy a new computer, you have the cash in the bank, and you can get 1,000 rewards points for purchasing the computer you were already planning to buy.


If you have ever tried to get a loan for a business, then you know it is almost impossible.

I often wonder how people are just strolling into banks with their ideas and coming out with money.

It isn't something that most small business owners will ever experience.

However, it is much easier to get a credit card with a $10,000 credit limit than it is to get a bank to give you a $10,000 loan for your business.

If you have tested your idea and your business can generate money.

I think you should use the credit card to help support and grow your business.

Primarily you are using the money to make money.

If you add this concept to your life, you will find that you manage your credit well and only use it when you absolutely must.

Taking Action

There is no reason to wait around when it comes to figuring out how to build credit.

You should check out our 90 Day Credit Sprint Challenge

It is a challenge that will guide you through the steps you need to take to increase your credit score by up to 100 points in 90 days.

Building your credit doesn't have to be a hard job with such an easy process.

It is time to take action and build a credit score that opens doors.

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.