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Financial goals / Credit Scores
Edited by: Amy Kalin, Senior Editor, Credit & Debt
Building credit doesn’t have to be a debt trap — or hard. Choose from options like secured credit cards or strategies that don’t require cards or loans. You’ll get your credit rolling in just weeks or months.
Image: Subpage New Credit Hero 1x desktopEditorial Note: Intuit Credit Karma receives compensation from third-party advertisers, but that doesn’t affect our editors’ opinions. Our third-party advertisers don’t review, approve or endorse our editorial content. Information about financial products not offered on Credit Karma is collected independently. Our content is accurate to the best of our knowledge when posted.
Credit-building options
We’ve pulled together the most-effective and doable strategies to begin establishing credit.
Image: homeTurn rent, utility or even cellphone payments into credit history by getting them reported to the credit bureaus using a free service like Credit Karma’s Credit Spark™
Image: build creditBuild credit essentially by making savings payments to yourself
Image: credit cardEase into credit card responsibility with a secured card or student card that’s easier to get and has safeguards
Image: savingsGet added to the credit card account of someone you trust
Bill payment reporting
You can build payment history (the biggest factor in credit scoring) based on bills you’re already paying, like your rent, utilities or cellphone.
This approach is also known as using “alternative data” to build credit history because there’s no loan or credit card involved.
You’ll need a credit reporting service to get set up.
Steps to get bill payments reported
- Find a bill reporting service, such as Credit Karma’s free Credit Spark tool. It allows you to report up to five billing accounts to TransUnion, and there’s no additional spending, new credit accounts or debt required.
- Compare costs — many reporting services charge fees for some services.
- Once you’re set up, check in to make sure your payment info gets reported.
Image: image 1Use a credit-building tool
Another way to build credit is through tools like a credit-builder loan or Credit Karma Money™ Credit Builder.
Generally, these tools involve making payments to a locked account for a period of time, with the payments reported to the credit bureaus.
The account funds get released to you eventually, according to specific terms, so it’s essentially building credit by saving up your own money.
Understanding the terms of different credit-building tools is key.
Credit-builder loans
Expect to pay some interest and fees
Costs and terms related to payments and release of funds vary by lender
Credit Karma Money™ Credit Builder
It’s free — no fees or interest
Payments can be as little as $10 a month
Once you save $500, Credit Karma releases the funds to you
Explore beginner credit cards
Credit cards can be a great credit-building tool if you make on-time payments and don’t rack up high balances.
Two of the main options are secured cards or student cards.
Both have their pros and cons, and terms can vary a lot from card to card, so you’ll want to compare options carefully.
| Secured card | Student card |
|---|---|
| Deposit required (this becomes your credit limit and may be refunded later) | Enrollment in an academic institution required |
| Easiest to qualify for | May qualify with limited or no credit |
| Often no or limited rewards | Often no or limited rewards |
3 credit card tips
Image: Watch out for fees and interest rates — Compare cards’ fees and annual percentage rates (APRs) before choosing one
Image: Confirm credit reporting — Make sure the card issuer reports to at least one of the major credit bureaus
Image: Only spend what you can pay back each month — Keep your balance under 30% of your credit limit (or ideally under 10%) to help your credit scores
Become an authorized user
If you’re not ready for your own card, you could consider asking someone you trust to add you as an authorized user on one of their accounts.
It’s a way to jumpstart your credit without taking on debt.
- You’ll get a card with your name on it
- The account’s payment history, including past payments, becomes payment history on your report, too (as long as the card issuer reports authorized users)
The catch? If the primary cardholder misses a payment or piles up debt, it can hurt your score, too.
Authorized user dos and don’ts
Do
- Choose a user with a long history of consistent on-time payments and low debt.
- Make sure the card issuer reports authorized users to at least one credit bureau.
Don’t
- Use the card for spending.
Reality check
Image: true falseA: False. Authorized users aren’t legally responsible to pay the credit card bill or any outstanding balances. That’s the primary cardholder’s responsibility. But your credit could take a hit.
Got questions? We have answers.
Start by opening a credit card in your name or becoming an authorized user on a family member’s account. To get your own card, you might consider a secured card requiring a deposit, a student card (often higher interest), or applying with a co-signer. Paying your bills on time and keeping your credit utilization below 30% will help build your credit score.
Having a co-signer can help you get approved if your co-signer has a strong credit history and income. But it’s key to remember that both you and your co-signer will share responsibility for the account. Missed payments or accumulating too much debt can hurt both of you. Co-signing is a big commitment for everyone involved. Consider all the risks carefully.
A secured credit card can help you build credit because it’s generally easier to qualify for and gives you a chance to build on-time payment history. You’ll put down a security deposit, which typically becomes your credit limit. Keep your balance low (under 30% of your limit) and consider a card that can be upgraded later to an unsecured card.
No, utility and phone bills don’t usually impact your scores, because generally those providers don’t report to the credit bureaus. But unpaid accounts sent to collections will likely get reported and significantly hurt your scores. There are opt-in services that submit your utility and phone bill payment information to the bureaus — though this may backfire if you miss a payment.
Scores are continually updating, because the information they’re based on is dynamic and reported to the bureaus at different times. Some information, like the age of your credit history, naturally changes over time, while other information, like an old credit inquiry or late payment, drops off your credit reports. Check your scores (and reports) frequently to understand your overall credit health.