Written by Anne-Marie Hays | June 26th, 2019Anne-Marie Hays is a Content Management Intern with Best Company. She enjoys comedy, hates crowds, and loves that you are reading this bio.
The Consumer Financial Protection Bureau suggests establishing first-time credit with the following products:
- Retail credit cards
- Secured credit cards
- Credit builder loans
If establishing credit for the first time seems like rocket science, it's okay. There are rocket scientists to help translate for us. We asked personal finance experts the best ways to help establish or re-build credit. Here’s what they said.
Know your endgame
"A secured card is a great way to be introduced to, or build back, good credit. These cards are reduced in terms of their credit limit and you must have enough funds to pay the deposit up front.
Consider your goal with applying for this card before opening the account; know the ideal credit score you want to hit before moving on to an unsecured card and gaining the deposit back.
An unsecured credit card places more trust in you to make smart financial decisions with a larger credit limit and quick access to spending. Not having a deposit requirement means you do not need to save up anything in order to open this account. Be aware of annual fees and review APR to vet out the best card options available." — Jared Weitz, CEO and Founder, United Capital Source Inc.
Give yourself a boost
“Luckily, new methods are being introduced such as Experian Boost which gives you credit for paying your utility bills and UltraFICO which looks at your bank account transactions and balances. These both give positive boosts to people with no credit or bad credit enabling them to start building their credit responsibly. These are both free which is much better than secured credit cards and secured loans as a first step.” — Ivan Chong, Founder, Lazy Finances
Research Fee Structure
“It’s a good idea to research secured credit card offers before choosing one. Not only will the interest charged be high, but you’ll want to find out how much you’ll be charged for processing and application fees, as well as annual fees.” — Cara O'Neill, NOLO
Try some nepotism
“Asking a friend or family member to add you as an authorized user on [their] credit card is another method that works well if they have a long credit history.” — Ivan Chong, Founder, Lazy Finances
“When you have a credit card, you might be tempted to spend more money than you can pay off in a month. With a loan, you won’t have that temptation, which better secures your success in the long run for your goal of building up credit.
When you use a secured credit card, you will pay interest on any money you carry over month to month, as you would with an unsecured credit card.
When you have a credit builder loan, you will pay interest on the loan, but you will also earn interest on the CD account where your money is being held. Overall, the credit builder loan can be the cheaper option.” — Patricia Russell, CFP, FinanceMarvel
Bet you can’t have just one
“Consider using a credit builder loan alongside a secured credit card, if you’re able — this will diversify your variety of credit accounts, which should help your credit scores.” — Sean Messier, Credit Industry Analyst, Credit Card Insider
Thanks to our experts for their helpful advice. For more credit how-tos and advice, check out our related articles below.
Related pages and articles:
Why Am I Invisible to Mainstream Lenders?: Understanding Credit Access
Experts Explain How to Build Credit from Scratch
What You Should Know about Credit by the Time You Turn 25
The Debtor's Guide for Raising Your Credit Score in 2019
True Stories of the Best and Worst Credit Advice
Exploring Credit Scores