Building Credit

By Jon Scott

In this article we will cover…

  • Methods to building credit

  • How to view your credit

  • The benefits of Experian Boost

  • How to become credit invisible

  • When to freeze your credit


A credit score is likely the most important aspect of your financial profile. Yes, outright cash can buy cars, homes, or other assets. Yet, the ability to finance these assets and invest the cash you don’t spend upfront can result in tons of wealth generation in the future. Despite the importance of credit, there are still millions of people with little to no credit history. We will explore ways to build credit other than using a credit card, and how you can view your credit.

Methods to Build Credit

Become an Authorized User

An authorized user on a credit card is an individual other than the cardholder who is able to make purchases using that credit card. The authorized user receives their own card from the issuer, but is not responsible for making payments. Card companies may charge an additional annual fee per authorized user, typically around $75 or more. The benefit of being an authorized user is that as long as the cardholder pays off the statement balance each month, both the cardholder and authorized user(s) will receive a positive boost toward their credit. Establishing your child as an authorized user at a young age then paying off the balance over the duration of their childhood will build a robust credit history for that child by the time they grow up. Authorized users can also be friends or other family members and authorized users can receive a positive boost to their credit even if the individual never uses the card themselves.

Credit Builder Loan

A credit builder loan is perfect for those with a thin credit history, no history at all, or those attempting to rebuild their credit. This loan is usually for an amount ranging from $300 to $1,000, placed into a secure account. You make fixed payments on this loan every month until it is paid off in full, at which point you will receive the loan proceeds (minus fees) at the end of the loan term. These loans usually have APRs ranging from 6-16%, though it is recommended that you always pay off the statement balance in full each month so the APR becomes negligible; in addition, you will be charged late fees if you miss payments.

This type of loan is offered by community banks, local credit unions, online lenders, and financial technology companies. Some examples of online lenders include: Republic Bank, Alltru Credit Union, Sunrise Banks, Self, MoneyLion, and Digital Federal Credit Union.

Personal Loan

Personal loans provide the loan amount upfront, and the loan’s receiver must pay back the amount in full as quickly as possible. It is advantageous to pay this loan back quickly due to the higher APRs (3-36%) for personal loans versus credit builder loans.

However, personal loans often aren’t the best for those with thin credit or those rebuilding their credit, as it is often difficult to find favorable terms versus the other credit building options listed in this article. Personal loans are provided by dozens of financial institutions of all sizes. Some highly reviewed options include: Sofi, Best Egg, LightStream, Marcus, Discover, and Upstart.

Secured Credit Card

A secured credit card is backed by a cash deposit from the cardholder. The amount that you put down as a deposit for the credit card becomes the credit limit for your card. This deposit amount acts as collateral–and is not available for the cardholder to retrieve–in case the cardholder cannot pay back the amount charged to the card. Each month, the cardholder will receive a statement listing the charges on the card. The credit card holder must pay the minimum due (but ideally the full statement balance) each month by the payment due date.

These cards are a good option for those with poor, little, or no credit history. The card issuer will send your usage to credit reporting agencies which will improve your credit score. Therefore, it is important to actually use this card when making purchases. However, the card is only a good option if the cardholder pays off the statement balance each month, because these cards have a high APR (20% or more), which comes into effect if the statement balance is not paid in full by the payment due date. Here are some highly ranked secured credit cards.

Viewing Your Credit

If you have not accessed your credit in a long period of time, then it is possible you can no longer view your credit. This is because credit histories are usually removed 10 years from the date the credit item closed. However, there are still methods of accessing your credit report:

  • Experian

    • Security questions that the creditholder can answer.

      • If the creditholder cannot answer the questions he/she will need to submit a request in writing

    • Request Credit Report by Mail

      • You may have a new address that needs to be verified. The account owner should mail a copy of their driver’s license or state identification card showing the current address, a copy of a utility bill or bank or insurance statement displaying the new address. The mailing also needs to include the creditholder’s full name (including any suffix like Jr.), social security number, date of birth, and any other addresses of the creditholder for the past two years

Experian Boost

Experian Boost is good for people with little to no credit history. This is because Experian Boost factors in your bank and credit card records to find on-time payments for bills including utility, streaming, and rent payments. These payments are reported to credit agencies and help build your credit. The best part is, Experian Boost is completely free.

How to become Credit Invisible–even if you have visible credit

The actual term for this is credit unscorable–meaning you have visible credit but there is not enough information for credit scoring models to create a score. The reasons for an unscorable credit profile are either because you have a thin file or because you have a stale credit file (no recent usage) or the few accounts you have open are not reported to a credit agency. The FICO definition for a stale credit file would be no credit usage for 6 months. The way to become credit unscorable would be to close all of your credit accounts for at least six months or longer or prevent all of your open accounts from reporting to a credit reporting agency.

When to freeze your credit

A credit freeze prevents most companies from viewing your credit file effectively meaning they cannot extend credit. A credit freeze will prevent you from purchases that require a credit check such as financing/leasing a car, renting an apartment, or opening a mortgage for a home. A credit freeze is helpful when you are experiencing fraud, meaning someone who isn’t you is using your credit. It may also be beneficial to freeze your credit if your personal data has been subject to a hacking attack revealing your personal information.

It is important that a credit freeze does not totally shield your credit. Existing creditors can still view your credit. Additionally, if you have not yet experienced fraud but want to help protect your credit, you can also sign up for a fraud alert which will notify you each time your credit profile is viewed.

The best credit decision for you

More than likely, the best decision regarding your credit is to have an open credit history. Experian credit boost is useful for those with limited credit or those looking to build credit. Even payments such as rent can be used by Experian Boost for those who don’t want to open a credit card. Car payments also count toward building credit regardless of using Experian Boost. Ideally, you should shoot for a minimum credit score of 740, which will give you access to many of the best rates available. If 740 is still a ways away and opening a credit card is out of reach, consider the loan options options, secured credit card, or loan options above. If your credit score is decent but can use some improvement, consider applying for a higher credit limit (while keeping utilization under 10% and paying on time) as well as Experian Boost.