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Bottom Line Up Front

  • You need a good credit history to qualify for loans and credit accounts, and to get decent interest rates when you do. 
  • To get started, you need to show you’ll use credit responsibly with tools such as secured cards and by always making on-time payments.
  • As your credit builds, keep it strong by monitoring your credit reports and spending habits regularly.

Time to Read

5 minutes

May 16, 2022

At first glance, building credit can seem like a challenge. How can you get the credit you need when you have little or negative credit history to start with? Don’t get discouraged, though; there are many ways you can build, rebuild or improve your credit. 

The more you practice good credit habits, the more your credit history will improve—helping prepare you for the future financing you may need. Here’s how to get started.

Best Ways to Build Credit

  • Apply for a secured credit card. A secured credit card works just like an unsecured card, but it’s guaranteed upfront by a cash deposit. For example, if you deposit $300, that’s your credit limit. Making on-time payments and keeping a low credit card balance helps your credit-building.  
  • Ask a family member to add you as an authorized user on their own credit card. You’ll get your own card, but the primary card holder sets the limit on how much you can charge. It can be good for both of you: You’ll learn how to manage a credit line, and the account holder can earn rewards on what you buy. Just keep in mind that if the main cardholder misses or makes late payments, it could end up on your credit report. 
  • Manage loans soundly. Student loans and most car loans are reported to major credit bureaus, meaning borrowing for school and large purchases like a car will help build your good credit score if you make your monthly payments on time. A history of on-time payments shows you can responsibly manage your line of credit. Consider having a cosigner on a loan if you aren’t able to qualify on your own.
  • Take advantage of good rent payment history. If you always pay your rent on time, you've shown good money habits. Credit reporting agencies include positive rent payment history on credit reports. To have your rent payment history added to your credit file, you can enroll in a rent-reporting service. Sign up through your property manager or choose your own platform. 

Keep Up Good Credit Habits

  • Make payments on time, all the time. Pay credit card companies, utility bills and other accounts on time and always for at least the minimum payment. Get a rough estimate of how much you'll need to pay with our simple loan calculator. Consider using calendar reminders and tools like automatic payments and money transfers. Missed payments will lower your credit score quickly, but on-time payments show that you use credit carefully.
  • Use different types of accounts. Your credit score improves when you responsibly use more than one type of credit account, including personal loans and installment loans, like a car loan. (Unfortunately, some common accounts like cell phone bills typically are not part of the scoring model.) Be mindful of how many new credit accounts you apply for, though, as too many hard inquiries into your credit file can negatively affect your credit score. 
  • Use your credit card regularly but keep your credit utilization low. Your credit utilization ratio is the percentage of your available credit that you actually use. Try not to use more than 30 percent of your available credit. So, if you have a $1,000 credit limit, try to keep your balance under $300. 
  • Keep current credit card accounts open. Unless you have a reason to close an account, consider keeping it open even if you don’t use it. Keeping an unused account open increases available credit, improving your use ratio.

Get Your Credit Back on Track

  • Check your credit report for errors and know your credit score. Your credit score is a snapshot of your credit history and shows lenders how responsible you may be as a borrower. Your credit report outlines your credit activity, your credit history and the status of your accounts. It’s important to check your credit report every year and dispute any errors or bogus new accounts. A mistake or identity theft gone unnoticed can ruin the credit history you’ve worked to build. You can get free copies of your credit reports at
  • Contact creditors directly. Sometimes your personal finance situation changes unexpectedly. If you contact creditors directly, they’ll often work with you to create a payment plan or negotiate your interest rate or due dates.
  • Create a budget or use our budget worksheet comparing your income and expenses. The best way to live within your budget and avoid bad credit is to catch problems early. With a realistic budget and a close eye on your bank account, you can see where you need to change course to get back on track quickly. 

Next Steps Next Steps

  1. Use Navy Federal’s Credit Score Simulator to show you how you can affect your score, for good or bad.
  2. Set up automatic transfersin next steps on current loans to ensure payments are made on time.
  3. Find out where your credit report stands now by getting a free copy at www.annualcreditreport.comin Next Steps.


This content is intended to provide general information and shouldn't be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.