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Ways to Establish Credit

Building a solid credit history is essential if you ever hope to get credit cards, a home mortgage or an auto loan; or to simply become financially independent. Many landlords even require good credit to rent an apartment. For young adults, the challenge has always been that you need credit in order to build credit, and it is not always available when you’re first starting out.

Your credit score (a three-digit number lenders use to signify a borrower’s trustworthiness) determines how easy, or how expensive, it is to get a loan. When starting out and building credit, it’s important to establish, then build upon that score. Here are some tried-and-true ways to do just that.

Pay Your Bills On Time

One of the best ways to improve your credit standing is to always pay bills on time. Not only with credit accounts but also with other accounts, such as utility bills.

Bills that go unpaid may be sold to a collection agency, which will seriously hurt your credit. If you struggle with paying bills on time, try setting up automated bill payment and direct deposit.

Establish a Good Employment History

When you have no credit history, lenders have to look at other factors, such as your employment history and residence history. If you have a good job with steady pay, you’re better off than if you have changed jobs often in the recent past. If you had any periods of unemployment, it can negatively impact your ability to get credit.

If you have lived in the same place for a good amount of time, your chances of getting credit are much higher.

Open a Credit Card

If you are a student with a limited credit history, or currently have no debt or credit, you may not have a credit score because the credit bureaus have no way to measure your ability to repay loans or pay your bills on time. However, contrary to what you may think, one of the best ways to build your credit history is to apply for and responsibly use a credit card.

The good news is that there are wide varieties of credit cards available to help you establish a credit history, ranging from unsecured to secured, as well as retail credit cards. If you would like to use a credit card to build credit, a Tower Mastercard® is a great card to start with. Remember, using a credit card can help you establish good credit as long as you make monthly, on-time payments.

Another way to build credit is by having your parents make you an authorized user on one of their credit cards, or co-sign a loan with you. Of course, a close friend or another family member may also be able to help.

Check Your Credit Mix

Lender’s credit scoring models want to see that you can responsibly manage all different types of financing—rewarding consumers who regularly pay multiple accounts.

So, having a mix of credit cards and various types of loans will likely bump your score up a bit, assuming you’re making all required minimum payments.

Installment loans

Starting out, it makes sense to take out a small starter installment loan or two to help you build a positive on-time payment history. You may open some credit accounts with finance companies or get “store cards,” such as when you buy furniture or appliances on installments.

Later, once you have established good credit history and have proper credit cards, you will want to limit or eliminate the use of this type of credit. They typically have high interest rates and most can be used only at the issuing store.

Student loans

College graduates can boost credit scores by making on-time student loan payments. But keep in mind, defaulting on the loan or making late payments will damage your credit history and score. Consider setting up automatic payments, so you don’t forget.

Utility bills

Get an apartment, telephone service, and other utilities in your name. Make sure to pay the bills on time. If you move, make sure to disconnect all the utilities that are in your name.


In some cases, paying rent on time can help with your credit score. There are several online companies—ClearNow, Rental Kharma, Rent Reporters, and RentTrack, for example—that will report your rent payments to one or more of the credit bureaus.

Check Your Credit Report

You are entitled, by law, to a free copy of your credit report every twelve months from the three major bureaus. Knowing where you stand and where your finances and credit stand is step one in the process. You can’t fix or build on what you don’t know about, so request your credit report today by visiting

Keep your score strong and healthy

The bottom line is that you’re just beginning your credit journey. Keep in mind that responsible use of credit now will pay dividends later. Maybe when you’re starting to think about buying a first home, or when you just want a credit card to take on a business trip.

Once you have a credit line, establish a good history by using it responsibly. Don’t spend too much, keep balances low, always pay on time, and don’t take on unnecessary credit.

Resources: Money Talks News, MoneyUnder30, LendEDU, CreditSesame, The Balance