I remember the first time I heard about credit scores in the United States. It felt like learning a secret language. For newcomers, students, and even long-time residents, the concept can be mysterious. But there’s nothing arcane about it. The process can be managed step by step—and it’s far more about habits than magic tricks. In my work with clients at Heart Mortgage, I have seen how having a healthy credit history can open doors, particularly for those aiming to buy a home or secure better loan terms.
Why a strong credit history matters for homebuyers and newcomers
When I started assisting people through Heart Mortgage, one lesson became obvious: opportunities in the US, especially in real estate, move in direct connection with credit status. From getting the apartment you want to qualifying for your first mortgage, your payment history and credit habits follow you everywhere.
If you’re thinking about buying a house, your credit profile will shape the rates you receive, the amount you’re requested to put down, and, in some cases, whether you get approved at all. In fact, payment history—or bill-paying reliability—counts for about 35% of a FICO score, according to the Federal Reserve. And the total amount you owe across credit lines is another key part, making up 30%.
Building credit shouldn’t feel intimidating. In this article, I will walk through seven practical steps—many I’ve shared directly with Heart Mortgage clients. With each step, I’ll point out the why, the how, various misconceptions, and the impact on real estate prospects.
Building credit with or without a credit card
In my view, there’s a common belief that you must have a traditional credit card to get started. That’s half-true. While credit cards are the most familiar path (nearly 80% of adults have at least one, according to Federal Reserve data), alternatives exist—and some don’t require plastic at all. Each method shapes your score a little differently, but all roads lead to that central goal: positive, reportable history.
- With a credit card, you typically build a mix of on-time payments and “available credit” history. This boosts your profile over time if you pay at least the minimum on time and keep balances low.
- Without a credit card, options like credit-builder loans or adding bill payments can jump-start your file. A credit card isn't strictly necessary—but responsible management is.
Strategy 1: Open a secured credit card
The concept of a secured card might sound backwards at first—you pay a deposit upfront, and that deposit doubles as your credit limit. These cards are specifically built for beginners or those with spotty financial pasts. I’ve seen many new-to-country clients rely on this step.
A secured card acts as a “training wheels” credit product, signaling to the major credit bureaus that you can borrow and repay reliably. All three major bureaus—Experian, Equifax, TransUnion—see regular use and on-time repayment as proof of trustworthiness.
The difference with a traditional, or “unsecured,” card? There’s less risk for the issuer, so they’re more willing to approve you even if you haven’t got a credit record yet.
Paying your secured card bill on time can steadily raise your score over months.
A Federal Reserve study showed that just two years managing a secured card bumped the median credit score up by 24 points. On the other hand, missing payments caused a whopping 60-point drop. So, consistency is king.
These cards often convert to unsecured after a year or two of responsible use, at which point you get your deposit back. Keep monthly balances far below your limit—ideally under 30%.
Strategy 2: Try a credit-builder loan
If credit cards don’t appeal or aren’t an immediate option, a credit-builder loan is another proven route. Here’s how it works: you borrow a modest sum, but rather than getting cash up front, the bank or credit union holds the money in a locked account. Every monthly payment you make is reported to the credit bureaus. When you finish, you get your money back—plus, a shiny new streak of positive payment history.
Credit-builder loans help show potential lenders that you can keep up with fixed payment plans and manage debt.
Based on Consumer Financial Protection Bureau data, opening this kind of account boosted participants’ chances of having a score by 24%. For those with no existing debt, scores jumped about 60 points above peers who skipped this step.
This tool fits especially well for newcomers, gig workers, and anyone with limited credit—or even those with previous mistakes in their records. Unlike a traditional loan, the “risk” is low since you receive the funds at the end.
Strategy 3: Become an authorized user
In my experience, many clients—especially younger ones—benefit from “piggybacking” on a trusted family member’s or friend’s credit line. If someone with established credit adds you as an authorized user, their track record can show up on your file. You don’t even have to use the card to benefit.
A healthy credit history is sometimes something you can “borrow.”
Of course, this only helps if the main account holder pays on time and keeps balances low. I usually recommend this option for spouses, adult children, or close friends—communication and trust are essential.
Some lenders report authorized users; some do not. Still, it can provide a meaningful boost for beginners as you build your own history in parallel.
Strategy 4: Report on-time bill payments (utilities, loans, rent)
This one is a bit of a hidden gem. Traditional credit scores usually miss your monthly phone, utility, or rental payments. But more services are offering to report these to credit bureaus, turning routine habits into positive marks.
Paying your bills for electricity, water, internet, or rent on time can help build up your credit file—if reported properly.
- Ask your landlord if they can report your rent payments (some property managers do this automatically).
- Look into third-party rent reporting services, which help make each rent check count.
- Some utility companies may also partner with bureaus or offer payment reporting.
According to the Federal Deposit Insurance Corporation, payment history is a major ingredient of your overall score, so expanding what gets counted is a smart play.
Strategy 5: Make every payment on time
Nothing affects your reputation with lenders more than punctuality. Missed payments, even just once in a while, can send your score plummeting. Consistency over months and years remains the heart of effective credit building.
Set up reminders or use automatic payments to make sure nothing slips through the cracks—utility bills, phone bills, loan payments, and credit cards all count.
From my own experience helping Heart Mortgage clients secure their dream homes, I often see how one late payment can mean hundreds of dollars more in interest or even a loan rejection.
Strategy 6: Keep your credit balances low
Using too much of your available credit suggests financial stress or risk. The rule of thumb: try to keep your card balances under 30% of your total credit limit.
If you have a secured or unsecured credit card with a $500 limit, avoid carrying more than $150 month to month. High “utilization” is a warning sign to lenders and can push your score lower, fast.
Strategy 7: Watch your credit report and fix errors quickly
It’s surprisingly common for credit reports to have mistakes: accounts you didn’t open, payments marked late by accident, or outdated items. The good news? You can request free copies each year from each of the major agencies and dispute anything fishy.
Regularly reviewing your credit reports and correcting errors is one of the most straightforward ways to protect, and even boost, your financial profile.
Sites like AnnualCreditReport.com help you keep tabs. According to FDIC guidance, checking for errors isn’t just wise—it’s a must for preventing harm to your score.
Why establishing credit matters for home financing
This subject comes up almost daily in my conversations with future homebuyers. At Heart Mortgage, the difference in mortgage options and rates can be dramatic depending on your score. For example:
- Banks assess your score to decide what kind of loans are available, how high your interest rate will be, and often how much you’re required to put down.
- Higher scores mean lower rates and more loan options—including for first-time buyers and those qualifying through ITIN or with special circumstances.
- Poor or limited credit can make banks hesitant, increase fees, or even block you from buying your chosen property.
One resource I often share with clients is this easy overview for first-time homebuyers from Heart Mortgage, which outlines what to expect as a new borrower.
If you ever wondered what score you should aim for, this guide on credit score maximums helps clarify benchmarks. And in special cases, like qualifying for an FHA loan with less-than-perfect credit, I found that tailored programs exist to make homeownership possible.
Common myths, misconceptions, and what doesn’t help
As someone who’s fielded many client questions at Heart Mortgage, I see myths swirl around credit every day. To clarify:
- Debit cards do not help you build credit, even if they carry the Visa or Mastercard logo. They simply move your existing money.
- Paying only cash leaves no trace for the credit bureaus.
- Prepaid cards also do not boost your history—they are not loans or credit lines.
- Frequent “hard inquiries” (applying for many new cards or loans at once) can actually harm your profile.
- Closing old, positive accounts can reduce your score by shortening the “age” of your file.
The only products that reliably build your credit history are those reported to at least one of the three big agencies—and show a record of payments or available debt over time.
If you want more in-depth, ongoing advice, you might check out this dedicated Heart Mortgage credit resource.
Real stories: Credit challenges and homebuying success
One example stands out in my mind: a client who arrived in the US just three years ago. With no credit file, they kept hearing “not enough history.” Using a credit-builder loan and timely rent reporting, their score jumped nearly 80 points within a single year. That growth, paired with continuous monitoring and a modest secured card, unlocked mortgage approval on favorable terms—not an isolated story, either.
Another client had slipped up with card balances after a layoff. They paused opening new accounts, paid back their debt methodically, and set up automatic reminders for every payment. Within 18 months, the score rebounded, and a new home became possible.
Whether you’re just starting out, recovering from past challenges, or trying to strengthen your file to become a homeowner, steady, documented effort always beats shortcuts.
What to avoid: Mistakes that harm your credit
I often urge clients to steer clear of these:
- Missing even a single payment—late payments have a lasting impact.
- Letting balances creep above 30% of your limit.
- Opening many accounts too quickly (each inquiry can lower your score).
- Closing older cards that have no annual fee (length of history matters).
- Ignoring your credit report, which may contain errors or identity theft warnings.
Your reputation with lenders, especially for a life-changing transaction like a home purchase, is worth protecting.
Next steps: How can Heart Mortgage help?
If you’re starting from zero or rebuilding, don’t lose hope. Each of these seven steps can make a real difference—in fact, you only need two or three to start seeing progress. If your goal is a home, Heart Mortgage can help guide you through qualification, loan selection, and credit strategies tailored to your unique circumstances. Our experience shows that honest, step-by-step planning beats quick fixes every time.
Ready to unlock new doors? Take the first step and connect with our team. At Heart Mortgage, we believe in making homeownership possible for everyone—no matter where your credit journey begins.
Frequently asked questions
What is a credit score?
A credit score is a three-digit number, usually between 300 and 850, that indicates your likely reliability in paying back borrowed money. Lenders use it to decide what kinds of terms, rates, and approvals to offer you. It is calculated based on your payment history, amount owed, length of history, mix of credit, and new credit activity, as outlined by the Federal Reserve.
How can I start building credit?
You might open a secured credit card, take out a credit-builder loan, become an authorized user on a trustworthy person’s account, or find ways to have utility and rent payments reported to credit bureaus. Whichever approach you pick, timely payments and regular monitoring are your most reliable allies.
Does paying rent help improve credit?
If your rent payments are reported to major credit bureaus, they can help you build a positive history. Some landlords do this, or you can use third-party reporting services—just make sure these payments actually reach the bureaus. Rent payments only help your credit if they are reported to one or more of the credit agencies.
How long does it take to build credit?
It can take three to six months to generate an initial score, and longer to reach “good” or “very good” levels. Major jumps take sustained effort over time. According to studies by the Federal Reserve and the Consumer Financial Protection Bureau, using products like secured cards and credit-builder loans responsibly for two years can make a large impact.
Is a secured credit card a good option?
For many beginners or credit-rebuilders, a secured card is an effective and low-risk entry point. It generally has easier approval, helps form positive habits, and can translate to a regular card once your credit status rises. Just be sure to pay on time and keep balances low.
