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How to Build Credit from Scratch: A Step-by-Step Guide for Young Adults
August 15, 2025
Let’s be real, credit is one of those “adulting” things that everyone says is important, but no one really sits you down and explains. You’ve probably heard phrases like “You need a good credit score” or “That will hurt your credit,” but what does that actually mean? And how do you even start when your credit history is literally blank?
Whether you’re a high school senior, a college freshman, or just starting your first job, building credit early is one of the smartest financial moves you can make. And good news: you don’t need a finance degree to figure it out. We’ll walk you through it, step-by-step. Let’s get into it.
What Is Credit, Really?
Think of credit as your financial reputation. It’s how banks, landlords, and sometimes even employers decide whether they can trust you to pay back borrowed money.
Your credit score, a number between 300 and 850, tells the story of how you’ve handled money in the past. The higher your score, the better your chances of getting approved for loans, credit cards, other financial opportunities, or even apartments.
How Your Credit Score Is Calculated
Knowing what goes into your score can help you make better decisions:
- Payment history (35%) – Do you pay your bills on time?
- Amounts owed (30%) – Also called “credit utilization,” this is how much of your available credit you’re using.
- Length of credit history (15%) – How long you’ve had accounts open.
- Credit mix (10%) – Having both revolving credit (credit cards) and installment loans (student loans, car loans) can help.
- New credit (10%) – Applying for too many accounts too quickly can ding your score.
Why You Should Start Building Credit Now
Good credit isn’t just for buying a house later in life. It can help you:
- Get approved for an apartment without needing a co-signer
- Qualify for lower interest rates on loans and credit cards
- Score better car insurance rates
- Avoid deposits on things like utilities or cell phone plans
Basically, good credit makes life cheaper and easier, and future-you will be grateful you started now!
Want Personalized Help? Contact PSB
How to Start Building Credit (Even If You Have None)
Here’s your step-by-step starter kit:
1. Open a Secured Credit Card
One of the easiest ways to start building credit is with a secured credit card. You put down a deposit (usually $200–$500) that becomes your credit limit. Use it for small purchases, like gas or groceries, and pay it off in full every month. Boom – you’ve started building credit!
PSB Tip: Peoples Savings Bank offers a secured credit card designed for first-time users.
2. Become an Authorized User
Ask a parent or another trusted adult to add you as an authorized user on their credit card. You’ll benefit from their good payment history without being responsible for the bill. Just make sure they’re financially responsible, because their habits will affect your score.
3. Pay Every Bill On Time
Payment history is the most important part of your score. Even one late payment can hurt. Set up auto-pay or phone reminders so you never miss a due date, whether it’s a credit card, student loan, or even your phone bill.
4. Keep Your Credit Usage Low
Aim to use less than 30% of your total credit limit. If your limit is $500, try not to carry a balance over $150. This shows lenders you can use credit responsibly.
5. Check Your Credit Report Regularly
You can get a free credit report from AnnualCreditReport.com. Look for errors, make sure your personal information is correct, and dispute anything that doesn’t belong.
6. Report Rent or Utility Payments
Services like Experian Boost or rent-reporting tools can help add positive payment history to your credit report.
Common Credit Mistakes to Avoid
Even small missteps can set you back. Avoid:
- Applying for too many credit cards at once
- Co-signing for someone who might not pay
- Closing your oldest credit card (this shortens your credit history)
- Maxing out your credit cards or only paying the minimum
How Long Does It Take to See Results?
Building credit isn’t instant, but here’s what you can expect:
- 3–6 months: First improvements
- 6–12 months: Noticeable score increase
- 12+ months: Eligible for better loan and card offers
Need Help Getting Started?
Peoples Savings Bank offers a variety of credit-building tools, including secured credit cards and personal loans, plus local experts who can walk you through your options.
If you’re ready to start your credit journey, or just have questions, stop by one of our branches or contact us online.
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TL;DR: Your Credit Starter Pack
- Open a secured credit card
- Pay bills on time
- Keep your usage low
- Check your credit report
- Avoid common mistakes
- Ask PSB for credit-building tools