build credit

March 26


How to Build Credit: Ultimate Guide for 2024

Ilir Salihi

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When you think of credit, what comes to mind? Credit cards? Mortgages? Maybe a car payment?

is one of the most important things to understand when it comes to personal finance. It's what allows you to get loans, buy a home, and make large purchases. But for many people, building credit can seem like a daunting task. Where do you start? How do you get started?

Luckily, we're here to help. In this ultimate guide, we'll show you everything you need to know about how to build credit in 2024. 

We'll cover topics like the different types of credit, how to use credit responsibly, and how to improve your credit score. By the end of this guide, you'll be well on your way to a healthy financial future. Let's get started!

What is Credit?

What is credit - and how does it work? Taking control of your credit can give you the freedom and stability to achieve all of your goals. Understanding what credit is and how it works is essential to being financially literate, so let's start there. 

Credit is simply a way to borrow money or access goods and services for which you don't immediately have the financial resources. To do this, lenders will review your —a record of how reliably you have made payments on loans in the past—and use it to assess your borrowing ability. 

As you gain experience responsibly managing repayment terms and building a solid payment history, lenders will be more likely to extend different forms of to you and at better terms. That's why it pays to understand this key financial concept right away.

Four Main Types of Credit 

Securing credit is an important part of financial stability. Knowing the different kinds of credit that are available can help you make informed decisions and find the best option for your situation. 

The four main types of credit include secured, unsecured, revolving, and installment. Secured loans require collateral such as a house or car to use as security for repayment of funds, while unsecured loans do not need collateral but may have higher interest rates. 

Revolving credit is like a "line" of credit where you can spend money up to a specific limit and pay off your purchases over time; this type usually has an annual fee attached. Lastly, installment loans are specific amounts with fixed repayment times - these could be for cars or large electronics, for example. 

Knowing about each type of credit and understanding its terms and conditions will help you effectively manage your finances and practice healthy spending habits in the long run.

Secured Credit

Secured credit is when you put down collateral, like a deposit for a car or home equity, to back up the loan. Secured credit can be a potent tool for managing debt and building a credit history. 

It can also assure creditworthiness in the event of default, as the collateral you've agreed to put up means something tangible is available to the lender in case of a missed payment. 

Secured credit often results in more competitive interest rates and better terms than unsecured lines of credit might offer, so if you have assets that you can use for collateral, it's a great way to access funds when you need them. 

If you currently have low (or no) credit, it may make sense to find a secured credit card. Paying a deposit on your secured credit card removes risk to the credit card company and allows you to use the card, make payments, and most importantly, build credit.

Note: Secured credit cards may sound similar to pre-paid debit cards, but these are not the same. Debit cards do not extend any credit, and most importantly, they do not report activity to the three main credit bureaus.

Also know that different secured credit cards offer competitive incentives to earn your business such as:

  • No credit check
  • Low deposits 
  • Cashback or travel rewards points 

With proper management and by keeping up with payments, secured cards can help you start building credit to achieve greater financial security. 

build credit with credit cards

Unsecured Credit

Unsecured credit doesn’t require any collateral and is based on your . You rely on your financial responsibility and trustworthiness when taking out unsecured credit. 

This type of is based on a record of past payments, so it's essential to maintain good financial habits and keep your credit score up. Fortunately, unsecured credit is convenient; there's no need to put up collateral, so everything can be done quickly and conveniently with no long-term obligations or surprises. 

No credit or bad credit?  It may be more difficult to (for example) qualify for an unsecured credit card. There will be less options available to you, at much higher interest rates and at a lower credit limit than if your credit score was considered ‘good.’ 

If you start out with an unsecured credit card, make sure to pay your balance in full each month to avoid high interest fees on your spending. Using credit cards (secure or unsecure) responsibly can be an effective way to build credit.

f you're a college student with little or no credit history, you may consider applying for a student credit card. These cards typically have lower income requirements than traditional cards, but will also come with lower credit limits.

Empower yourself by taking control of your finances with an unsecured credit card or loan supported by a solid history of making payments on time.

Revolving Credit

Revolving credit is a type of unsecured credit that gives you a set limit that you can borrow against and pay back over time, like with a credit card. Revolving credit can be a valuable tool for managing your finances, allowing you to borrow against a predetermined limit which you can then repay over time. 

Many financial institutions offer revolving credit, so it's essential to do your research and find the solution that best fits your needs. When used responsibly in the context of an overall budget and savings plan, revolving credit can provide convenience and flexibility when unexpected expenses arise. 

As with any or borrowing strategy, it's essential to understand all the terms and commitments involved before entering a revolving credit agreement. With the responsible use of revolving credit in mind, it can be a great way to manage your daily expenses with confidence.

Installment Loans 

Installment loans are paid back in fixed payments over time and can be used for things like buying a car or taking out a mortgage. Installment loans provide a great way to finance something that you may not be able to cover the entire cost of upfront. 

Ideal for car purchases and mortgages, installment loans are paid back through fixed payments made over an agreed-upon period of time. This allows you to achieve your financial goals without sacrificing too much of your monthly budget. 

Plus, peace of mind comes with knowing that each payment is taking you closer to owning something tangible—and maybe even being debt free. 

Consider this an investment in yourself, a stepping stone to achieving something that may have been just out of reach if it weren't for this . Taking on responsibly can be the beginning of something great!

Build your credit with monthly rental payments.

If you are not a homeowner, but are instead paying rent each month, make sure these monthly payments are getting reported to the three credit bureaus. 

If you’re renting from an individual landlord, he or she is likely not reporting your rental payments to the credit bureaus.

With apps like Boom Pay, you can report ongoing rental payments and up to 24 months of prior payments to TransUnion, Experian, and Equifax. 

Click here to learn more about Boom Pay.

Boom Pay app- pay rent, build credit

Pay your rent and build credit with Boom

How to Build Credit History

Building your credit history and improving your score is incredibly beneficial, and there are a variety of options for you to take advantage of.

If you're just getting started, either a secured credit card or a student credit card discussed earlier is an excellent place to start. Additionally, you may consider:

  • Finding a co-signer: finding a friend or family member to co-sign for you is a great way to get a or card you may not otherwise qualify for.
  • Taking out a credit builder loan: Many small banks and credit unions offer credit builder loans as a way to build and improve your credit score. They're no risk to the bank and allow you to prove creditworthiness.

Learn more about credit-builder loans in the video below.

Click to play

Credit cards, loans, and rental agreements are just some of the different types of credit you can use to your advantage. 

By regularly making timely payments, you're able to build up your credibility as a reliable borrower slowly. In addition to this, understanding how to properly manage and control your spending is also important. 

Taking these two strategies together and executing them in unison will allow you to build up a robust credit profile and improve your credit score considerably over time. With diligent effort and dedication, you can succeed in growing your credit history and enjoy all the benefits that come along with it.

Understanding the different types of credit is an important step in taking control of your finances. Knowing which type of loan to apply for can save you time and money, whether you're looking to buy a new car or take out a mortgage. 

By using credit wisely and building up your , you can improve your score and get access to better rates and terms. Do you have experience with any other types of credit? Share your story in the comments below.

Related: Build Credit with Your Monthly Rent Payment  

Know Your Credit Score and What Factors Influence it

Your credit score is essential to your financial health and should not be taken lightly. It's important to know your credit score and the factors that influence it, so you can make sure you're making the best decisions for your financial future. 

Knowing your credit score can empower you to work to improve it if necessary and keep it up when it's at a good level. Some factors impacting your credit score include prior payment history, current debt load, length of and available credit. 

Make sure you're keeping track of these, as having too much debt, or a delinquent payment could have a lasting effect on your credit score and make it harder for you to achieve significant milestones like owning a home or car or even getting a loan.

Click here to visit and check your credit report (free). 

Accessing credit reports is a great way to stay on top of changes in credit scores. Stay informed about how to maintain excellent credit through responsible use, and act now to secure the best financial opportunities later!

The FICO Factors

Now that we have a general understanding of your credit score, let's dive into the specifics of your FICO score. Your FICO score is a number on your credit report that tells lenders how creditworthy you are. 

It measures various components of your financial life and assigns you a three-digit score from 300 to 850, with a higher number typically being more desirable for lenders. Five main components make up your FICO score: payment history, length of credit history, types of credit used, new credit, and amount owed. 

Payment history makes up the bulk of your score (35%), which means you should be diligent about paying off any loans or credit bills on time; it's best to set up automatic payments if possible. 

Length of (15%) is determined by when you open lines of credit and how long ago those accounts were opened. 

Types of credit used should consist of different kinds like mortgages and installment loans (10%). 

New credit (10%) looks at recent applications for loans or cards as well as hard inquiries related to being approved for those accounts. 

Lastly, the amount owed (30%) determines your total amount due on all accounts and individual account utilization limits. 

Understanding each component of your credit report is vital in helping you build a solid financial foundation with a healthy FICO credit score.

Request your free credit report here.

credit report showing credit score

Credit Can Ebb and Flow

It's perfectly normal for your credit score to vary over time - whether you're just starting out with building credit or you've had a long-term history of good money management. 

Taking on new debt levels will cause your score to drop as lenders assess the risk associated with them while paying off debt, and demonstrating responsible financial habits can push it back up. 

Credit scores can also go down simply because the information in the payment reporting system is outdated, so it's important to check regularly and make sure all the data that makes up yours is current. 

Don't be discouraged by temporary dips; getting ahead financially starts with creating solid habits that protect your creditworthiness, which will lead to an improved score over time.

Use Credit Wisely with these Tips

Managing your credit is an integral part of your financial responsibility. By using credit wisely, you can establish strong credit and make sure it stands up to whatever surprises life has in store. 

To ensure a healthy and sustainable financial future, consider following these ‘good credit habits’ to use credit smartly:

  • Start by paying your bills on time and ensuring that you stay within your spending limits.
  • Keep track of any ongoing offers or rewards programs and apply for the ones that fit with your lifestyle.
  • Make sure you understand exactly what happens after the initial promotional period ends before signing up for any new credit cards.
  • Use the debt snowball method to repay debts and help you build credit

Together, these simple steps can help establish good credit over time, which will open more doors for you in the long run.

Click to play

Everyone is at a Different Stage

Whether you are new to the world of credit or a veteran, improving your credit score is achievable with dedication and knowledge. The first key step towards enhancing your score is understanding where you stand and knowing your options. 

No or bad credit? Once you have a firm grasp on your current situation, laying out specific strategies designed to fit your needs can help significantly. 

Build credit by understanding credit-building tactics such as:

  • maintaining low balances, 
  • making timely payments, 
  • avoiding hard inquiries, 
  • and staying with the same lender for an extended period of time 

These are all crucial aspects of strengthening your overall credit score. 

Even slight improvements can create positive momentum. Actively work to lower the number of accounts that have delinquent debt or have exceeded their spending limit, and you should notice a serious bump in your credit score. 

With effort and determination from ourselves, anyone can build their credit score regardless of where they started from!

How to Build Credit? Monitor Your Credit Report

Keeping an eye on your credit report is essential to managing your finances and building a solid financial foundation. This can seem like a daunting task, but it doesn't have to be. 

Checking in on your credit report at least once per year gives you the reassurance and confidence that everything is accurate and up-to-date. Additionally, it's essential to make sure any personal information is kept secure and encrypted, ensuring that no one has access but you or the necessary authorities. 

Monitoring your report regularly provides accuracy, security, and peace of mind - not just today but for years down the road.

Request your free credit report here.

Improve Your Credit Score

If you're looking to take your finances to the next level, one of the best things you can do is to make sure you have a good credit score. 

This can open up many new opportunities for you and create specific processes, such as qualifying for a or a mortgage, much smoother. You can take several steps immediately to start improving your credit score. 

Start by regularly monitoring your credit report and making sure no errors or inconsistencies remain unchecked. Consider diversifying your credit portfolio by obtaining different types of loans, but be prudent in all your financial choices. 

Additionally, reducing debt, making payments on time, and refraining from opening too many accounts can all go a long way towards helping give you the confidence of knowing that no matter what financial decisions need to be made in the future, having good credit will always be beneficial.

Build Credit by Staying Informed

Staying informed is a key piece of becoming financially responsible. It can be intimidating to keep track of the latest news and developments in the credit field, but with online articles, podcasts, and tools like budgeting apps, it's easier than ever to stay on top of your credit score and ensure you're on track. 

The sooner you become aware of changes or regulations that may affect your credit score, the more prepared you will be. Keeping up with the latest credit information also allows you to take advantage of opportunities for improvement when they arise. 

So commit some time each week to staying informed about all aspects of personal finance, and don't shy away from asking questions where you need help - an ounce of prevention is worth a pound of cure!

Understanding credit is the first step to using it wisely. Now that you know how credit works and what factors influence your credit score, you can use credit to your advantage by following the tips in this blog post. 

And remember to monitor your credit report regularly for accuracy and take steps to improve your credit score if needed. 

About the Author

Ilir Salihi is the founder and senior editor at He oversees all content for IncomeInsider and its partner sites. His articles and insights have been featured on Barchart, Benzinga, and, among other prominent media channels.

Ilir Salihi


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