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How Do You Build Good Credit?

Last Updated: December 5, 2024

6 min read

Table of contents

Key Points:

On-time payments and low credit card debt are key to building credit.
A student or secured credit card can help you build credit history if you have no credit history.
A review of your credit reports can help you spot inaccuracies or fraudulent activity that may hurt your credit.

Your credit history matters, whether you’re getting a credit card or buying a home. When you understand how to build credit, it can give you the confidence you need to broaden your financial opportunities. But how do you get good credit?

Your credit history is the record of your borrowing and repayment activity over time. It’s reported by your credit card company and other lenders to the credit bureaus and recorded in your credit report. Your credit report is a comprehensive account of your credit history.

Your credit score is a three-digit number (usually between 300 and 850) that quantifies the information in your credit report and indicates to lenders how likely you are to repay what you borrow. A good credit score can help you qualify for higher credit limits and lower interest rates. A low credit score has the opposite effect. So what can you do to ensure your credit health? Here are some tips on how to build good credit.

Five financial factors that impact your credit history

To build or rebuild your credit, you can start by addressing the five core categories influencing your credit report and score: payment history, amounts owed, length of credit history, new credit, and credit mix. Each weighs differently on your score. That means some financial behaviors impact your credit more than others.

Payment history (35% of your credit score): Your payment history shows how often you’ve paid your bills late or on time. Consistent, timely payments will help your score. Late or missed payments can dramatically hurt your score. Consider setting up automatic payments with your card issuer to ensure you never miss a due date.
Amounts owed (30% of your credit score): Your credit utilization ratio is the total amount of debt you owe across all your credit accounts compared to your total available credit. When you keep your credit utilization ratio low, it can make you more appealing to lenders. When you get in the habit of paying every credit card balance in full (or as close as possible) each month it can help with managing your credit utilization and credit card debt. Try budgeting with a mobile app or set spending alerts to track how much you’re charging.
Length of credit history (15% of your credit score): Lenders look at how long you’ve had each credit account. The longer you’ve had your accounts open and in good standing, the more it can help your score. Closing an account eventually removes it from your credit history, so keeping your oldest accounts open can help your score, and closing an old credit account may negatively impact your credit.
New credit (10% of your credit score): When lenders look at your credit report, it may show up on your report as an inquiry and can stay on your file for two years. Too many hard inquiries or opening too many new accounts back-to-back can signal risk. Be mindful of when and how often you apply for new credit accounts.
Credit mix (10% of your credit score): The combination of your different types of credit accounts is your credit mix. It’s good to have both revolving credit (like credit cards) and installment loans (like a student loan, mortgage or car loan). Having experience with different types of credit shows lenders you’re no stranger to responsibility. Consider how to diversify your credit accounts to improve your mix.

If you need to establish your credit history or rebuild your credit, there are cards specifically geared toward helping you build and improve your credit: secured and student credit cards.

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How to build credit with a credit card

If you’re looking to build credit history, having a credit card can help. Using any credit card responsibly (keeping balances low and making payments on time) can help your credit score.

Secured credit cards and student credit cards often come with a lower spending limit and a higher interest rate. But these types of cards help you build credit by providing an opportunity to demonstrate responsible use. This can show lenders you’re capable of handling debt while opening yourself up to more borrowing options down the road.

Secured credit card: With a secured credit card, your credit line will equal your deposit amount, starting at $200¹ for Discover secured cards. Your deposit acts as collateral if you can’t pay back what you owe on the card. Aside from the deposit, a secured credit card works like a standard credit card; you can make purchases within your spending limit and may even earn cash back rewards on eligible purchases.

A secured credit card may also provide a direct line to unsecured credit. For example, with Discover, you can upgrade to an unsecured card after 6 consecutive on-time payments and maintaining good status on all your credit accounts.²
Student credit card: If you’re in college and want to build a credit history without a security deposit, consider a student credit card. Student cards tailor qualifications and terms toward the unique needs of students. For example, you may be able to apply for a student credit card without a credit score, and they may also have more flexible income requirements.
Authorized users: If you can’t qualify for a secured card or student credit card, you can still build credit by becoming an authorized user on someone else’s account. While you won’t have an account in your name, you will get a credit card you can use for purchases. You can build credit history if you and the primary cardholder use the card responsibly.

Get your credit report and check for errors

Part of building excellent credit is tracking your progress. Checking your credit report can show you how you’re doing and making sure the information on your report is accurate can help you avoid unwarranted hits to your credit scores.

Did you know?

Everyone is entitled to a free credit report from the three major credit reporting agencies. You can request a copy of your credit report at AnnualCreditReport.com. Discover^® Cardmembers can get a free Credit scorecard with your FICO^® Score and important information behind it.³

Check your report for inaccuracies, especially in balances or payment history. You have the right to challenge any information you believe to be inaccurate in your report. You can file a dispute with the credit bureau directly or contact the creditor in question and ask them to investigate and correct it. If they can’t verify that the information is accurate, they’re bound by law to remove it, according to the Consumer Financial Protection Bureau. By resolving these issues quickly, you can stay on top of your credit score.

It may seem overwhelming to build good credit, but you can do it successfully using the practical strategies outlined here. These simple tips are easy to start today and add to your journey toward a good credit score.

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