There are a lot of firsts that come with becoming more financially independent: your first real job, your first apartment, your first car. You may not be thinking about all of them yet, but planning ahead can make those milestones easier to reach when you're ready.

Building credit is one way to prepare. The financial habits you establish now can help you build a strong credit history over time, whether you're getting ready to rent an apartment, finance a car, or take another big step. Understanding what affects your credit score — and how to manage credit responsibly — is a good place to start.

What factors affect your credit score?

Your credit score reflects how you've managed credit over time. The widely used FICO scoring model considers five main categories:

• Payment history
• Amounts owed
• Length of credit history
• New credit
• Credit mix

The exact formula can vary by scoring model, but the main categories show what matters most. For someone starting to build credit, that means paying on time, managing balances, and giving their credit history time to develop.

How do you build credit for the first time?

Opening a credit card or taking out a small loan can be a good way to establish a credit history, as long as the account fits your needs. A credit card can be useful for purchases you already have room for in your budget, while a small loan can also help establish credit by financing something you actually need.

If you're just getting started or have limited credit history, a secured credit card or secured loan may be worth considering. Secured products are backed by funds you deposit or savings you already have, which can make them easier to qualify for while still helping you establish a positive payment history.

But the goal isn't to collect accounts. Take on the credit you need, understand the terms, and manage it responsibly.

Why are on-time payments so important?

One of the most helpful things you can do when building credit is simple: make your payments on time. In traditional FICO scoring models, payment history accounts for approximately 35% of a score, making it the largest single factor in the model. Automatic payments or calendar reminders can help keep due dates on your radar.

How does credit utilization affect your score?

You should also consider how often you’re swiping your credit card. Credit utilization is how much of your available revolving credit you're using and it can have a big impact on your credit score. For example, if your credit card has a $1,000 limit and your balance is $300, your utilization is 30%.

Keeping utilization below 30% is a commonly cited guideline, but it's not a magic number. In general, using a smaller portion of your available credit is better than regularly using most of your limit.

Why should you check your credit reports?

Your credit reports contain information used to calculate your credit scores, so it's worth knowing what's there. If you find an error, you can dispute it with the credit reporting company, and checking your own credit report doesn't hurt your score.

Check periodically for:

• Accounts you recognize
• Accounts you didn't open
• Accurate balances and payment information
• Information that appears inaccurate or outdated

You can request free credit reports from the three nationwide credit reporting agencies through AnnualCreditReport.com. Reviewing them regularly can help you spot errors and identify signs of fraud.

Should you apply for more credit to build your history?

You don’t need multiple credit accounts to build a strong credit history. In fact, applying for several accounts in a short period can result in hard inquiries that may affect your credit score. Since new credit makes up 10% of a FICO Score, focus on using the credit you already have responsibly and apply for something new when it makes sense for your needs.

Can you build credit fast?

No, there is no way to build credit instantly, and there is no universal timeline for building credit. Starting early gives you time to make consistent payments, manage your balances, and establish a history of responsible credit use. Those habits can be useful long before you're ready for your first apartment, car loan, or other major financial milestone.

How can you prepare for your first apartment or car loan?

You don't have to wait until you're ready to sign a lease or shop for a car to start preparing. Start with the credit you can manage, make payments on time, keep your balances manageable, and check your credit reports along the way. If you're planning ahead to build credit for an apartment or future car loan, giving yourself time to establish those habits can make the process more manageable.

Take charge of your credit

Knowing where your credit stands can help you feel more prepared for what’s ahead. Take the first step today with MyCreditScore & More, a free tool in Digital Banking. Use it to review your credit profile, understand where you stand, and stay informed as you work toward your financial goals.

FAQs

Do I need a credit card to build credit?

Not necessarily. A credit card is one way to establish a credit history, but certain loans and other credit accounts may also be reported to the credit bureaus. The key is using credit responsibly and making payments on time.

How long does it take to build credit?

Building credit takes time, and there is no universal timeline. Consistently making payments on time, keeping balances manageable, and maintaining accounts responsibly can help you establish a positive credit history over time.

What factors affect your credit score?

Credit scores are typically influenced by payment history, amounts owed, length of credit history, new credit, and credit mix. Paying on time and keeping credit card balances manageable are two of the most important factors.

Does carrying a balance help build credit?

No. You don't need to carry a balance from month to month to build credit. Making payments on time and keeping your balances manageable are more important factors.

What is a good first step for building credit?

Start with the amount of credit you can comfortably manage. Then focus on making payments on time, keeping balances manageable, and monitoring your credit along the way.