What are some ways to start or rebuild a good credit history?

Having a history of good credit helps you get housing, bank accounts, credit cards, and loans, and reduces how much interest you pay. Ask your bank, credit union, or local nonprofit credit counseling agency about credit cards and loans—like the ones listed below—that can help you start building credit, or rebuild your credit if you need to. The payments you make are reported to the three nationwide credit reporting companies, and they create a credit report for you. Paying on time, every time, can help you build a strong credit history and lower your costs for borrowing money in the future.

• Secured credit card – You put in an amount of cash, for example $500. Then, you can spend up to that amount on your credit card. When you pay the secured credit card bill, you restore your spending amount back to the amount you put in.
• Credit builder loans – You build credit and savings at the same time, through a loan from your bank or credit union. The money is not yours for spending—instead, it is held for you, it is held for you as savings. You pay the loan in small payments, usually over six to 24 months. At the end of that time, you receive the full amount you paid.
• Retail or store credit cards – You can often get a credit card with a relatively low credit limit from stores, warehouses, gas stations, and other types of businesses that sell goods and services. The low credit limit means you are not as likely to run up high credit card bills.

Not all financial products help you build your credit history. Typically, payments like these are not reported to the nationwide credit reporting companies:

• Debit card and cash. When you use a debit card or cash, you are not borrowing money that you need to repay later. This does not help you prove that you can pay off your debts.
• Prepaid card. Unlike a secured credit card, when you use a prepaid card, you can spend only the money you deposited beforehand. While they can help you avoid debt that you cannot pay off, prepaid cards do not help you establish your credit history.
• Payday loan. Even if you make on-time payments, a payday loan does not help your credit history because the payments are not reported to the nationwide credit reporting companies or included in your credit reports.
• "Buy here, pay here" auto loan. Taking out a "buy here, pay here" car loan at a used car dealership does not help establish your credit history. The dealers often report only negative information—like late payments—not positive payment information, to the credit reporting companies.

Find out more about ways to build your credit