How To Build New Credit

Woman with cash and credit card

Credit is defined as “an estimate, based on previous dealings, of a person’s or an organization’s ability to fulfill their financial commitments”.  If you have never borrowed before, then you do not have a credit history. Initially, it might be difficult for you to secure a loan because without a credit history, the lenders will not know if you are a responsible payer or you are a credit risk.

A credit history is a summary of your borrowings for a number of years. A credit report is a detailed summary of your credit history. And a credit score is a breakdown of the information from your credit report. It provides a template that you can follow to establish good credit. Your credit score will list down, in percentages, your payment history, the amounts you owed, the length of your credit history, if you have new credit and the types of credit you have used.

There are ways to slowly build a new credit and here are some of them.

  1. Apply for a credit card. As you are just beginning to build a credit history, then one credit card will be enough. It will be better for you if you get a secured credit card issued by a major card issuer. A secured credit card is one where you give a specific amount as advance payment. For example, you pay the credit company $1,000, so in effect you can spend up to $1,000 using your credit card. The charges you made for purchases will be automatically deducted from your advance payment.
  2. Once you have established a credit history, you can apply for another credit card. Make sure that you establish good credit by keeping your payments up to date. Credit bureaus will keep track of your credit payments monthly through your creditors. It will be very good for your credit rating when you settle payments regularly and on time.
  3. For your security, do not overcharge your credit card. Make it a point to leave at least 30 percent of your credit limit for your credit balance. When you just want to browse and not really set on buying anything when you visit the shops, leave your credit card at home to prevent you from using it for impulse buying.
  4. Keep doing these steps to establish a good credit history and credit rating for about seven years. As much as possible, keep your first credit card. It is a statement of your dependability and credit worthiness.
  5. Vary the types of credit that you will use. As you make a name for yourself use your good credit standing to secure a bank loan, a mortgage, and a car loan perhaps. But keep in mind that you have to pay all your bills on time so do not go on a loan-securing spree. Base it on your ability to pay and your credit history will flourish.
  6. Check your credit report and let this be your gauge and guide as you continue to prosper. You can obtain a free annual report from  This is a website set up by the three credit bureaus Experian, TransUnion and Equifax. To know more about establishing credits and credit reports and other consumer news and information, visit the Federal Trade Commission (FTC) website.

Establishing new credit is easy if you know the rules and follow them religiously. Your good credit standing will attract new sources of credit. Take this as one of the positive signs that your business is getting more successful. Just make it a priority to maintain your good credit score.


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