How to Build Credit Without Going Into Debt

Building credit is about more than a number. Having a strong credit score is one of the best ways to create a better financial future. It can help you qualify for personal or auto loans, secure better interest rates, and make it easier to get approved for a mortgage or housing.

But if you just turned 18 or are starting over after a financial setback, how do you build credit while avoiding debt? Here are some practical and responsible ways to improve your credit without creating a financial hardship:

• Open a secured credit card: A secured credit card reduces your risk by requiring a cash deposit that acts as your credit limit. The cash deposit helps reduce the risk for lenders and is often refundable.
  
  
• Keep credit utilization low: By making multiple small payments throughout the month and keeping your credit utilization below 20%, you can establish a credit history without putting yourself in a tough spot.
  
  
• Don’t open too many accounts at once: Multiple hard inquiries can lower your credit score. Plus, having multiple lines of open credit puts you at risk for accumulating debt or making an impulsive, large purchase.
  
  
• Monitor your credit regularly: Use tools like Credit Karma or Experian to periodically monitor your credit, track your progress, or be aware of any sudden changes.
  
  
• Pay bills on time: This may seem obvious, but a third of your credit score is based on payment history. Missing a payment or paying your bills late will negatively impact your score. Consider setting up autopay or calendar reminders so you never miss a payment.
  

Starting college or new to credit? A low-limit student card is an accessible way to begin building credit, and often doesn’t require a credit history. A starter card is another solid option. This card type is available to anyone new to credit, but has stricter approval criteria.

Remember, building credit doesn’t have to mean taking on debt. With the right tools and habits, you can take control and build a strong financial future.