How to Start Building or Rebuilding Credit

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Building or rebuilding credit can seem like a daunting task, but it’s very important and even necessary for your financial future. Having good credit will help you qualify for loans, as well as determine what the interest rate will be.

Whether you are just starting your credit journey or trying to rebuild, we at Merrick Bank are here to help keep you on the road to healthy credit. Here are a few things to keep in mind.

Your Credit History

In order to build credit for the first time or rebuild credit from past financial problems, you have to establish a positive credit history. This can be done in many ways. One option is to get a secured credit card (which is simply a credit card that requires a cash deposit that then becomes the credit line for the account).With a secured card you can often set your limit with the amount you’re able to put as a deposit and then show your ability to use and repay this amount. 1

Another way to help establish or rebuild your credit is by getting a co-signed credit card or loan. A cosigner is someone who shares equal responsibility for the debt. Having a cosigner can help you qualify for the loan. It can also be helpful to have “authorized user” status on another person’s credit card. This means that you have someone else’s card in your name, which allows you to make purchases, but prevents you from being the primary card owner. Please keep in mind, however, not all lenders report authorized users to the consumer reporting agencies.

One great option is to get a credit-builder loan. This is a small loan designed to help consumers establish or boost credit. There are two main types of credit-building loans, including:

Standard secured loan – somewhat like a secured credit card, the borrowers use money they already have in a savings account or CD to secure the loan.

  1. Standard secured loan – somewhat like a secured credit card, the borrowers use money they already have in a savings account or CD to secure the loan.
  2. Unsecured loan – works well for someone who needs cash upfront; however, these loans can have a higher interest rate.

Your lender can help you determine which option is best for you. Once the loan account is created and you begin making payments, you will start establishing/reestablishing your credit history. If you’re trying to rebuild credit, a credit-builder loan should increase your score as long as no other credit problems persist. 2

Practice Good Money Habits

Practice good habits to demonstrate you’re creditworthy. This includes making all of your payments on time and keeping your credit utilization low. Credit utilization compares how much your credit card balance is compared to your credit limit. So, if you have a credit limit of $500 and use $250 in purchases, your credit utilization is 50 percent.  A good rule of thumb is to not exceed a 30 percent credit utilization ratio at any point in a billing cycle on any one of your cards. 3

By keeping this ratio low, you show that you’re likely not spending much of your monthly income on debt payments. Credit lenders like to see this, because it means you’re more likely able to pay back the money you borrow from them.


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Avoid opening too many credit accounts, as doing so in a short period of time can have a negative impact on your credit score. 4 Instead, stick with as few accounts as you can. Your credit score improves with a longer credit history. So, be sure to keep the accounts you do have open for as long as possible.

Another way to practice good money habits is to set up reminders to ensure you never miss a payment. Paying your bills on time will not only demonstrate that you’re creditworthy, but it will also help boost your credit score.

Sometimes people struggle with knowing where to start when it comes to building or rebuilding their credit. The key is to start now and be patient, since this process takes time. Before long, you’ll be on your way to a great credit score.


[1] Tate, Ashley. (2017, March 8). How Long Does It Take to Build a Good Credit Score? Retrieved from

2 Johnson, Allie. (2015, April 23). Create, restore credit with a credit-builder loan. Retrieved from

Konsko, Lindsay. (2017, August 31). 5 Tips for Winning the Credit Utilization Game. Retrieved from

4 How to Quickly Improve Your Credit Score. (2017, February 17). Retrieved from