3 Steps to Build Good Credit in 2024

Good credit starts at a credit score of 670, and having it offers its fair share of benefits. You're more likely to get approved for loans and credit cards if you have good credit. You'll also be able to qualify for better offers, including loans with lower interest rates and the top credit cards with the most features. And that's just the tip of the iceberg, as there are many other ways your credit score affects your life.

Nobody starts out with good credit, but anybody can get there. If you follow a few simple steps, you could build good credit in 2024.

1. Get a credit card (if you don't have one already)

If you already have a credit card, you can skip this step. Otherwise, look for credit cards that fit your current credit profile. If you're starting from scratch, or you have a low credit score because of previous issues, secured credit cards are often the best choice.

A secured credit card requires a security deposit to open. Many of them require a minimum deposit of $200 or $300, but there are also cards with lower minimums. The deposit is why these cards are easier to get. It provides the card issuer with some extra protection -- if you don't pay the bill, it can cover the losses with your deposit.

You might be wondering if you even need a credit card to build credit. You can also build credit with a loan, but credit cards are a better option.

With a loan, you need to pay interest. Loans also have a limited lifespan. With a credit card, you can avoid interest charges if you pay in full every month. That means you can build credit for free. And you can keep your credit card as long as you want.

2. Pay the bill on time every month

The biggest part of your credit score is your payment history. If your credit file is full of on-time payments, then you'll likely have a high credit score. Late payments, on the other hand, do serious damage to your credit. They also remain on your credit history for seven years.

Pay your credit card bill by the due date every month. By the end of the year, you'll have 12 on-time payments. That alone could be enough to get you to good credit. Also aim to pay your credit card bill in full every month. Paying on time is what's most important for your credit score, but paying in full means that you won't get hit with credit card interest charges.

Just so you know, payments that are less than 30 days late won't hurt your credit score. Because of how credit reporting works, payments aren't counted as late until they're at least 30 days past due. It's still best to avoid paying late at all. You can get charged a late fee as soon as your payment is late. But if you miss a payment, don't panic. Get caught up right away before it counts against your credit score, and ask your card issuer if it will waive the late fee. Most will waive it the first time around.

3. Don't charge more than 30% of your credit limit

The other key factor in your credit score is how much of your credit you use. It's known as your credit utilization. If you use a large portion of your credit, you're considered a higher risk. That means you'll have a lower credit score.

Let's say your credit card has a $1,000 credit limit. If it has a balance of $800 or $900, that will be bad for your credit score. The rule of thumb is to stay below 30% credit utilization. So, with a $1,000 credit limit, you'd want to keep your balance below $300.

This is harder when you're starting out and your card has a low credit limit. It won't be difficult forever, because as your credit score improves, you'll get access to larger credit limits. Your card issuer may raise your credit limit automatically, or you can ask the card issuer to increase your credit limit. Once you have good credit, you could also qualify for high limit credit cards. With higher credit limits, it's easier to keep your utilization low.

The amount of time it takes to get good credit varies. It depends on your current credit profile and what you do going forward. If you follow those steps, your score will build quickly, even if you're starting from scratch.