How to Build Credit History ?

If you haven’t learnt about how to get a credit card from our earlier article, we recommend you to have a look if you do not have a credit card. Here we will look at the importance of building credit history in US and ways to build credit.

US runs on credit.  Even if you have $10000 in your bank account and no credit history whatsoever, you will have hard time buying a property on credit.  As a student, I was hesitant to get a credit card initially as I always like to keep things simple, however, it was not until I talked to a friend who has been in US longer than I that I learned that once I get out of the college, my credit history is going to play a vital role in getting a rental place, buying a car and even buying a home.

I was glad that I got that piece of advice, thanks to that advice, now my credit rating is ‘excellent’ and because of that, I got all my loans (credit card, car, student loans, housing loan) at competitive rates.

It takes time, mind you, to build credit history but it is not very difficult to build one if you are disciplined.

build credit history

Below are some ways you can build your credit history (this assumes that you already have a credit card, if not, look at the earlier article about getting one with or without credit history):

1. Auto pay: 

This is one of the easiest ways to ensure that your credit card is paid on time, always.  As long as you review your credit card statements every month, this is a convenient method. If you are lazy and hardly check your statements then this may turn out to be a dangerous way to losing money too.

2. Buy things on credit and then pay it off:

Instead of using cash or debit card, use your credit card wherever it is accepted.  Set an auto-pay or a reminder to yourself to pay off the credit card before the deadline to avoid additional fees/charges.  Most credit cards have 30-45 days for you to pay off. This will not only help with credit history but in some cases you can get cool ‘money back’ offers from the credit card company.  For instance, American Express Cash Back card gives you 1%-5% cash back on your purchases.  Lot of other credit card companies have similar offers these days.

3. Loan payments:

Even if you have $10,000 lying in your bank and even if you want to just buy a used car which costs only $8000, it may still be a good idea to buy it on credit.  When we first started out, we bought a car for $5000 for cash and after 3 years, we bought a car on credit, sure we had to pay an interest of 4% but it was worth it for what it did to our credit history.  Again, this is not the only way but is a quicker way to prove your credit worthiness.

4. Timely payments:

Always ensure that all your credit cards, loans are paid on time.  One defaulted payment may cause unnecessary damage to your credit history.  I was surprised to see that a payment we missed like 2 years back still shows up on our credit report. Auto-pay comes to rescue or setting reminders in your personal (or work) email will help too.

5. Credit union account/credit cards:

If you are new to US, chances are it is difficult to qualify for a credit card and without a credit card/loan it is difficult to build credit history. Paradoxical, I know. One easy alternative is to join a credit union in your locality.  Most places have local credit unions whose only condition is that you live in the county that they serve. It is relatively easier to get a credit card, with low limit initially, from a credit union. You can also maintain your savings account with them.

6. Keep an eye on your credit score:  

You can get free credit reports or subscribe for a credit report company service to keep an eye on your credit history.  You want to make sure that no one else has taken your identity to apply for credit cards or loans, checking your credit report is a good to check.  There are few companies who offer you first free credit report including:,

7. Co-signer based application:

If you have never had a card before, you can start by applying to one with a co-signer (someone who has better credit history than yours). Co-signer credit card is a good option for someone starting out new to start building your own credit score of your own.

Those are some of the ways to build credit.