How Do You Build a Credit History?

Starting to build your credit history may seem like a tough mission, but it’s a crucial step toward securing your financial future Whether you are a young adult, military recruit, or using credit for the first time, starting your credit history unlocks important benefits. It can help you score lower interest rates, better loan terms, or even make it easier to rent your first apartment. But how do you build credit history in the first place? Learn how to start from scratch.

What is Your Credit History?

Think of your credit history as a service record or mission log. It tracks how you have handled credit over time, with each action recorded. This includes things like paying off your card on time or accumulating outstanding balances. Ultimately, lenders use credit history to assess how reliable you are when it comes to managing debt (also known as “creditworthiness”).

The main parts of credit history include:

• Accounts Open: Includes all your credit lines, including credit cards, student loans, mortgages, car loans, etc.
• Balances Owed: Shows how much you owe across these accounts.
• Credit Limits: Reflects the boundaries for each credit line.
• Credit History Length: Measures how long your credit accounts have been active.

Your credit history and credit score go hand-in-hand. Your credit score is a three-digit figure that reflects how effectively you have managed your finances. However, while your score may change more often, your credit history builds steadily over time, reflecting your ongoing financial habits.

How to Build Credit History

Creating a strong credit history is possible with consistent effort. Here’s how to set yourself up for lasting financial success:

1. Open a Credit Account

You can’t build credit history by staying in the barracks. Put yourself on the front lines by opening your first account:

• Secured Credit Card: A great option if you are building credit from scratch. Secured credit cards require a refundable deposit as collateral, making them accessible for borrowers and low risk for lenders.
• Personal or Military Loan: If eligible, taking out a small loan is another way to build credit. Just ensure you can handle the monthly payments before moving forward!
• Become an Authorized User: If a family member has strong credit, consider becoming an authorized user on their account. You will gain credit history benefits from their positive track record without the responsibility of managing the full balance.

2. Maintain Active Accounts That Report to Credit Bureaus

To build a strong credit history, it's important to show consistent activity by using your accounts every month, even for small purchases like coffee or streaming services. Just be sure any card or loan you apply for reports to all three major credit bureaus—Experian, Equifax, and TransUnion. Otherwise, it won’t contribute to your credit history or improve your credit profile.

3. Pay On Time, Every Time

This is a non-negotiable step. Making consistent, on-time payments demonstrates reliability. Missing payments impacts your credit score negatively and stays on your record for years. Set calendar reminders or automate payments to make sure you never miss a due date.

4. Keep Accounts Open

The length of your credit history is a key factor in its strength. The longer your accounts stay open, the more it reflects your reliability as a borrower. Closing older accounts—even if they see little action—can cut your credit history short and hurt your overall standing. You can maintain your position by keeping those accounts open to show you are able to manage credit over time.

5. Responsible Credit Use

Using credit doesn’t mean maxing out your card. Aim to use less than 30% of your credit limit to show lenders that you can use credit responsibly. For example, if you have a $1,000 limit, try not to charge more than $300 at any given time. If you must spend more, try to make extra payments to keep your utilization rate in check and avoid it staying too high for too long.

6. Broaden Your Credit Mix

Over time, managing different types of credit—such as revolving credit like a credit card and installment loans like a personal loan—shows your ability to handle multiple financial responsibilities. This adds depth to your credit history and makes it stronger in the eyes of lenders.

7. Keep Your Credit Activity in Check

Stay vigilant by regularly reviewing your credit report to catch any errors or issues that could hurt your record. You can access a free credit report once a year from many services. If you spot inaccuracies, take action—report them to the credit bureau to set the record straight!

Credit History: Advancing Your Financial Mission

Building credit history isn’t just about the numbers—it’s about earning trust from lenders and setting yourself up for future financial success.

Ready for your next step? A secured credit card is an excellent way to start building credit safely. Specifically, Armed Forces Bank’s Credit Builder Secured Credit Card is designed for those looking to establish or improve their credit history. It has no application fees, annual fees, or over-the-limit fees, and it automatically reports your positive behavior to the three major credit bureaus.

At our military bank, we are committed to supporting you every step of the way. Let’s create your credit history together!

APPLY FOR CREDIT CARD TODAY!