How to Build Your Credit in 5 Simple Steps

Published on June 14th, 2019 by CreditFresh

Girl indicating five with her hand

Did you know that roughly 4 out of every 10 Americans don’t know what their credit score is? So if you’re not sure what your score is, you are certainly far from alone.

Experts have recently identified a dangerous gap in the nation’s financial literacy and this may be one of the reasons we’re seeing such high consumer debt numbers.

The unfortunate reality is that far too many people don’t know what their credit score is until they learn that it’s too low to qualify for the home or vehicle they’re applying for. They also may not know what makes up their credit score until they’re going through the process of rebuilding it.

If you’re reading this blog, there’s a chance that you’ve recently checked your credit score and it’s not where you want it to be. You may find yourself asking “How long does it take to build credit,” and you may not know where to start.

Today we’re going to give you a broad idea of how your credit score is calculated, and how to build your credit history in a strategic way. Keep in mind that credit building is not an overnight process and often requires the building of good habits over several months.

Also, keep in mind that no single strategy we discuss will work for you if you’re doing things to hurt your credit elsewhere. For example, making regular payments on a line of credit will not help your credit score if you’re carrying too much credit card debt.

The Basics: What Makes Up Your Credit Score?

Blocks of alphabets forming - Check Credit Report

One of the most important parts of taking control of your credit score is understanding what drives it.

According to, this is how the math breaks down for calculating your FICO score:

  • Payment history, 35%: Are you making account payments? Do you have any delinquencies?
  • Amounts owed, 30%: How much of your available credit are you actually using?
  • Length of credit history, 15%: How long have you had these accounts open?
  • Types of credit used, 10%: Do you have a good mix of revolving and installment credit?
  • New credit, 10% : How many credit inquiries have you had recently?

If you’re going to build your credit history, you have to do all the right things on all of those fronts. For example, keeping a low balance on a credit card isn’t going to help your credit score if you have delinquent accounts elsewhere.

Now that you’re more familiar with the math involved, here are the 5 steps you can take to help get the numbers moving in the right direction.

Step 1: Check Your Credit Report for Errors

Your credit report may not be 100% accurate and it may contain misinformation that is currently hurting your credit standing! In fact, a study found that roughly 1 in 5 people have found errors on their credit reports.

However, you can dispute things you find on your report and things can be overturned. This process may take a few months to complete, but the impact it can have may be well worth it. When you’re learning how to build your credit history, this step is a great place to start.

Here is the step-by-step process:

Order Your Credit Reports

You want credit reports from the 3 major agencies in Equifax, Experian, and TransUnion. You don’t have to contact all 3 individually, you can get a free report from all 3 every 12 months by:

  • Visiting
  • Calling 1-877-322-8228
  • Printing an Annual Credit Report Request Form and mailing it to:

    Annual Credit Report Request Service
    P.O. Box 105281
    Atlanta, GA 30348-528

For security purposes, you will have to confirm your:

  • Name
  • Address
  • Social Security Number
  • Date of birth
  • Previous addresses over the last two years (if applicable)
Ensure Everything in Your Report is Accurate

Once you receive your reports, take the time to thoroughly go through them. You want to ensure everything is accurate. Make sure any accounts listed under your name are accurate, with the proper balance and information. Be on the lookout for any accounts that you didn’t open and may be the result of identity theft or fraud.

Also, verify that any public record information about any legal decisions or bankruptcies that you or your spouse may have been involved in is completely accurate.

If you find something that doesn’t add up, you will want to send a formal dispute.

Filing a Dispute

Gather any documents, invoices, or statements that can prove your dispute. You will want to send copies of these documents with your dispute letter(s), while you keep the originals.

Your best bet is to use the Federal Trade Commission’s two dispute letter templates:

You will need both letter templates. It may be a good idea to send your letter(s) by certified mail, with “return receipt requested” to track the status.

While it may seem like a hassle that this process may take up to 30 days per dispute, it’s worth being patient as you don’t want your score to be hurt by inaccurate information about your credit history.

Step 2: Formulate a Reasonable Budget

Analyst with iPad in her hand with financial report being displayed in it

Creating a realistic budget can be one of the most crucial steps in learning how to build your credit history. This can ensure:

  • You’re living within your means and not relying on credit to buy things
  • You’re aware of your cash flow at all times
  • You’re prepared to pay your bills on time

Ensure that your budget includes all of your monthly bills, especially the small monthly subscriptions (Netflix, Spotify, or Xbox Live) that you may sometimes forget about.

If you’ve never prepared a budget before, Mint has a number of free templates you can download, with helpful guidelines for most many situations.

Step 3: Prepare For Financial Emergencies

Now that you’ve created a budget, you have a solid plan in place. However, life often has its own plans.

What happens when an unexpected expense comes up? A recent survey revealed that 40 percent of Americans said that they would have difficulty finding an extra $400 for an emergency.

$400 is actually a fairly low amount for an emergency. Consider that the average car repair in 2017 was anywhere from $500 - $600, unexpected vet care for a pet can range from nearly $800 to $1,500, fixing a burst pipe can cost $1,000 to $4,000, and bringing a child to the ER can cost you well over $1,000.

What do you do when these situations come up and you don’t have enough money saved?

A Line of Credit

You might consider getting a line of credit to act as a safety net for when life’s financial emergencies happen. A personal line of credit can give you access to the funds you need to handle unexpected emergency costs when you don’t the savings to cover it.

Step 4: Pay Your Bills on Time

Keyboard with a Pay Bills key

As you saw earlier, your payment history can make up over a third of your credit score, which makes it vitally important. You need to make it a top priority to pay all of your bills on time and avoid any delinquencies.

It’s important to know that you won’t be rewarded for every single time you pay your gas bill or cable bill on time. Not all telecommunication or utility companies will report your payments to credit agencies.

How to Build Your Credit Paying Your Rent

Like many of your monthly bills, your rent payments are very unlikely to be reported to credit agencies. In fact, less than 1% of FICO reports have rent information.

However, you may be able to help build your credit history by paying your rent on time if you work with a rent reporting company. These companies will work with your landlord to send reports to the major credit agencies about your rent payments, but you will need to keep in mind that not all credit scores take rent payment information into account in calculating your credit score.

These companies include:

Most companies will charge you some sort of sign-up fee and a monthly fee after that. However, if you’re looking for opportunities to potentially impact your score, this may be a simple addition to your strategy.

Step 5: Use Credit Wisely

With your credit usage being worth almost a third of your credit score, this is also a key area to focus on.

You need to keep a low credit utilization ratio, meaning you’re using a relatively small amount of your available credit on your line of credit or your credit cards. Not all experts agree on what exactly a good number is, but ideally, you will want to keep it as low as possible.

However, keeping a line of credit or credit card for months at a time with a zero balance and no activity is not an effective way to build your credit history. Generally, keeping your revolving credit account relatively active and paying the balance down quickly is considered a good strategy to maintain or positively influence your credit history.

Conclusion: How Long Does it Take to Build Credit History?

As you can see from all of the information above, there are a lot of factors in play when you’re building your credit history.

It’s next to impossible to give you a ballpark number of how long it may take you. It all depends on what state your credit is in now, where you want it to be, how you spend your money, and how you use your credit along the way.

For some people, this may take a few months, while other people may need a few years to get their credit where they want it to be. However, the journey to learning how to build your credit history can be a very rewarding one.