4 key credit moves for 20-somethings

What you can do now to boost your credit score and build the foundation for your financial future.

If you are just starting to build credit, you may find yourself at one of two extremes: struggling to get past a scant credit history or tempted to charge up a storm and worry about it later. Either end of the spectrum can hinder your credit score. Building a solid credit history is essential to qualifying for a mortgage or an auto loan, and credit scores may be used by landlords and even potential employers.

Here’s a look at four important steps that can help you build a solid credit history.

1. Pay your bills on time and in full

Payment history accounts for just over a third of your credit score. Credit scorer FICO® recommends that you always pay your bills on time to avoid late fees and negative marks on your credit report. While credit cards and loans almost certainly appear on your credit report, other billers, such as utilities and cell phones, sometimes report payment histories too (especially if you’re late paying). So paying on time is important for all your bills.

Ideally, pay off the balance in full each month to avoid paying interest charges. But if this isn’t possible, be sure to pay at least the minimum amount required.

2. Consider tools to rebuild your credit

If you have trouble getting a credit card—and that may be the case if you haven’t had access to credit—there are a few options that could help get you started. First, consider a checking account. While this won’t necessarily help you build credit, having a good relationship with a financial institution could help you get a loan down the line or even your first credit card.

You might also consider a secured card. These typically require a cash deposit that serves as the credit line. If you default your bills, the issuer can keep the portion of the deposit needed to repay what you owe.

If you make your payments on time, the issuer may increase your credit line, though it’s not guaranteed. Timely payments on a secured card can also help you qualify for an unsecured credit card with a larger credit line.

Another option to build credit: If you have a parent or other family member with good credit who’s willing to make you an authorized user on his or her account, doing so can help you develop your credit history.

Lenders don’t like to see you use all your available credit, even if you pay it off each month.

3. Don’t use all your credit

Lenders don’t like to see you use all your available credit, even if you pay it off each month. Try to keep your borrowing below 30 percent of your total available credit. This is called your credit utilization rate.

Understanding available credit

Card limit


If you spend


you've used 50%

If you spend


you've used 20%

For instance, if you have a credit limit of $5,000 and your charges total $2,500, you use half your available credit for that card. If your balance is $1,000, you use 20 percent.

4. Check your credit once a year

By law, once a year consumers are allowed to check their credit reports for free from each of the three credit bureaus. Some credit card issuers also give you a copy of your credit score for free. This is a good opportunity to make sure your issuers correctly report to the credit bureaus, and to check for any fraudulent activity.

Using credit sensibly early on—by keeping tabs on your credit report and paying your bills on time—can help open doors for you financially and professionally. Develop strong habits now and see where your future takes you.

FICO is a registered trademark of Fair Isaac Corporation in the United States and other countries.

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The material provided on this website is for informational use only and is not intended for financial or investment advice. Bank of America and/or its affiliates, and Khan Academy, assume no liability for any loss or damage resulting from one’s reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional when making decisions regarding your financial or investment options.

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