How to Start Building Credit in Your 20s

May 31, 2024 2 min read

If you’re in your 20s, you probably know how important it is to have good credit. A good credit score may help you get better interest rates if you buy a car or house, lower the amount you pay for auto and home insurance and even make it easier to rent an apartment. It can even factor in when you start internet service or sign up for a cell phone plan.

But when you’re just finding your financial footing, what are the best ways to start building credit?

To start, it helps to understand your credit score. That’s a number that’s usually between 300 and 850 that lenders use to decide whether to offer you credit. It’s based on your credit report, which lists your credit accounts and your payment history. 

If you’re young and don’t have any loans or credit cards, you don’t have a credit score. So, it’s hard for lenders to know how likely you would be to pay back the money you borrow. That’s why you need to build good credit.

Steps You Can Take to Establish Credit

Here are some ways you can start building your credit, according to the Consumer Finance Protection Bureau (CFPB).

Open a Secured Credit Card

Secured credit cards are a common credit-building tool for beginners. With these cards, you deposit money, say $300, in a bank account. The bank gives you a credit card with a $300 spending limit. Over time, after you prove you can make your payments when they’re due, these cards can usually switch over to a traditional credit card.

Apply for a Store Credit Card

A lot of times, it’s easier to get approved for a credit card linked to a retailer than a card issued from a bank. Store credit cards often have high interest rates, though, so you’ll want to avoid carrying a balance and pay your bill in full every month.

Take Out a “Credit Builder” Loan

With these loans, you put money into a locked savings account, usually at a credit union. You make payments over six to 24 months to cover the amount. At the end, you get all of your money back.

How to Get a Good Credit Score

Once you have some credit, you need to manage it well to get a good credit score. The CFPB says it can help you with the following practices.

Pay All Your Loans on Time

Late payments are a sign to lenders that you might be a financial risk. As you pay your loans, your credit history improves over time, and your credit score may go up.

Use 30% or Less of Your Available Credit

If you have a credit card with a $1,000 limit, try not to charge more than $300. That shows lenders you aren’t about to max out the amount you could spend.

Don’t Apply for a Lot of Credit at Once

If you apply for multiple credit cards or loans, it may look like you’re in a bad financial situation. You likely won’t get dinged if you’re shopping around for the best rate for a car loan or a mortgage, though try to keep all the credit inquiries from different lenders within 14 days, if possible.

Look Over Your Credit Reports

Federal law allows you to get a free credit report every year from, and currently, you can get a free weekly credit report online. Three major companies provide credit reports — Equifax, Experian and TransUnion — and their reports could be slightly different. If you see any mistakes or misinformation on your credit reports, take steps to resolve them right away.

Connect With Expert Advice

When it comes to managing your money in your 20s, there’s a lot to learn. From building credit and making sure you have the insurance coverage you need to paying off student loans and saving for retirement, there’s a lot to juggle. A Farm Bureau financial advisor can sit down with you, review your financial situation and guide you toward a solid financial future. Reach out today to learn the next steps to take.

Want to learn more?

Contact a local FBFS agent or advisor for answers personalized to you.