How to Build a Credit History Explained: A Beginner's Guide

Building a credit history can feel intimidating when you are just starting out, but it’s one of the most important steps to establishing your financial health. A good credit history can unlock opportunities like lower interest rates, qualifying for loans, and even renting your first apartment. If you are a college student, young adult, or first-time credit card user, starting your credit history is a necessary milestone. This guide will explain what credit history is and outline clear steps to build it from scratch.

What is Credit History?

Think of your credit history as a financial biography. It’s a record of your credit journey over time, noting things like timely payments or unpaid balances. Lenders rely on your credit history to gauge how trustworthy (or “creditworthy”) you are when it comes to borrowing money.

Here are the main components of a credit history:

• Accounts Opened: Includes all credit cards, student loans, mortgages, car loans, etc.
• Balances Owed: The total amount of money you currently owe from taking out credit.
• Credit Limits: The maximum amount you are allowed to borrow on various accounts.
• Duration of Credit History: How long each account has been active. (Older accounts show long-term financial behavior).

Credit history works hand-in-hand with your credit score, which is a three-digit number that rates how well you have managed your finances. However, while credit scores may change regularly, your credit history builds steadily over time, providing a long-term view of your financial habits.

How to Build Your Credit History

Building a strong credit history is achievable with some steady effort. Here’s how to set yourself up for lasting financial success:

1. Open Your First Credit Account

You can’t build a credit history by watching from the sidelines—opening your first account gets you in the game.

• Secured Credit Cards: Perfect for beginners with no credit history, secured credit cards require a deposit (e.g., $300-$3,000), which acts as collateral and becomes your credit limit.
• Become an Authorized User: If you have a family member with good credit, consider becoming an authorized user on their credit card. This means you get added to their account, allowing you to build credit based on their positive payment history—without being fully responsible for paying the balance.
• Student or Personal Loans: If you are eligible, another way to establish credit is by taking out a small personal loan. Just make sure you can comfortably manage the monthly payments.

PRO TIP: Check whether the card or loan you are applying for reports to all three major credit bureaus (Experian, Equifax, and TransUnion). If it doesn’t, it won’t help you build credit.

2. Keep Your Accounts Active

Good credit history should show consistent activity. Make sure you are using your accounts every month—even if it’s just buying a coffee or paying for your favorite streaming service. The key is regular, responsible use.

3. Don’t Close Old Credit Accounts

The length of your credit history plays a big role in its overall strength. Simply put, the longer your accounts stay open, the better. That’s because a longer history shows you are a reliable borrower. Closing older accounts—even if you don’t use them much—can shorten the length of your credit history and potentially hurt your credit score.

4. Make Payments On Time

Pay every single bill on time—every time. This may include setting up automatic payments if necessary. Why? Late payments stay on your credit report for up to seven years, which can be a major setback when trying to build a strong history.

5. Use Credit Sparingly

Lenders like to see that you are using credit wisely—not maxing out your cards at every opportunity. Ideally, aim to keep your credit utilization under 30% at any time. For example, if you have a $500 credit card limit, try not to carry a balance over $150. However, if you find that you need to spend more, consider making additional payments throughout the month to keep your credit utilization in check and prevent it from staying too high for an extended period.

6. Diversify Your Credit Accounts

Having different types of credit, like credit cards and loans, helps build your credit history. It shows you can manage various kinds of credit, making your history stronger—just like having a mix of skills on your resume.

7. Monitor Your Credit Activity Regularly

Keeping tabs on your credit activity helps you catch mistakes or fraud early, ensuring your credit history accurate. You can get a free copy of your credit report once a year, which makes it easier for you track your credit and confirm that everything is in order.

Credit History in the Making

Building a strong credit history takes time—there’s no overnight solution. It’s about gaining the trust of lenders and laying the foundation for your financial future.

Not sure where to begin? Secured credit cards are a fantastic first step. They are specifically designed to help beginners build credit easily and confidently. And when it comes to getting started, Academy Bank’s Credit Builder Secured Credit Card is a great choice. With automatic reporting to all three major credit bureaus and no annual fees, it’s the best credit card to build credit.

Start writing your own credit history today!

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