4 Tips for Building Credit In Your 20s

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Last updated on February 2nd, 2024

Building a good credit score is one of the best things you can do in your 20s. An excellent credit score later in life can help you secure the best rates on mortgages, personal loans, and even the top sign-up bonuses on rewards credit cards. Wondering how to get your credit up to speed? Here are four simple tips for building credit in your 20s.

Tip #1: Find the Perfect Starter Credit Card

When trying to build your credit score, getting a credit card should be primary on your list of things to do. What type of credit card should you look for, however?

The first thought that pops into a person’s mind is likely an impressive rewards card, like the American Express Platinum Card or the Chase Sapphire Reserve. Not so fast, say industry experts.

Secured Credit Cards

Experts (including the BestCards team) widely hail secured credit cards as a top entry into the world of credit cards. Why? Secured cards are much easier to get than traditional unsecured credit cards, giving those new to credit a chance to gain experience – and banks the security of an initial deposit.

The security deposit for a secured card also acts as the credit limit. This unique feature allows applicants to essentially choose what their opening credit line will be, usually starting as low as $200 and as high as up to $5,000.

When looking for a secured card, pay close attention to the annual fee, the APR, and the other fees associated with the card. Aim for an annual fee below $50, though the cards with the best interest rates typically fall within this price range. Some secured cards also offer the chance to progress from a secured to unsecured option with on-time payments and a demonstration of financial responsibility.


Unsecured Credit Cards

For those who want to avoid a secured card (or simply don’t have the available funds for a security deposit), there are some excellent unsecured card options for those new to credit. Typically, these cards feature higher interest rates and smaller credit limits, but they require no deposit. Many even come with the prospect of higher credit limits with on-time payments.

There are a few of these cards from major issuers, though the Platinum Mastercard from Capital One is a notable example. Other popular options include the Merrick Bank Double Your Line™ Platinum Visa®,  the Reflex Platinum  Mastercard® and Indigo® Platinum Mastercard® from Celtic Bank, as well as the Milestone® Gold Mastercard® from the Bank of Missouri.

Tip #2: Always Pay On-Time

Getting a credit card is only the first hurdle in building your credit in your 20s. The next two steps represent the grunt work in increasing your credit score.

Part of raising a credit score is demonstrating good financial habits. How do you do that? First, you should always pay your bills on time. Additionally, you should always aim to pay your statement balances in full each month.

Payment history accounts for 35% of what makes up your FICO score. FICO is one of the most popular scoring models for credit scores and provides lenders with an idea of how big of a risk a credit applicant poses when lending.

Because payment history is the most significant factor of a credit score, you should pay on time every month. Even one missed payment can harm your score – especially so early in the game. And, since late payments remain on a credit report for seven years, those marks can hurt you well into your later years.

Tip #3: Keep Your Credit Utilization Low

Equally essential to building your credit score in your 20s is paying your balances in-full each month. Credit utilization – or the amount of available credit you use – makes up another 30% of the FICO scorecard. Quickly raising a credit score means ideally keeping your credit utilization below 10%.

Of course, not many people can afford to pay off their credit card balance in full every month, which is why secured cards like the Oakstone Platinum Secured Mastercard® are so impressive for those new to credit. Those who plan on carrying a balance should aim to keep their credit utilization below 30%. Keeping the ratio below 30% will help you maintain (and build) your credit score while reducing the amount of interest you will have to pay in the long-term.

One of the best ways to keep credit utilization low is to only use your credit card for small purchases and incidentals. Only using your card for paying for things like snacks can help train you to use the card responsibly until you have a higher credit limit or more disposable income.

Tip #4: Tackle Those Loans

Student loans are one of the most significant financial issues facing people in their 20s. And, while not everyone will find themselves buried under a mountain of student debt, enough will to warrant some advice.

Student loans operate as installment debt, meaning it is another form of credit on your credit report. This can be a good thing, since “credit mix” accounts for 10% of your FICO score. Of course, this credit mix only works if you start paying off your loan balances.

There are a variety of services online that provide refinancing for student loans, but since many students likely have their loans serviced through the federal government, this may not be an option. Federal student loans are not eligible for refinancing but are eligible for consolidation. Those with loans can also appeal for Income-Based Repayment (IBR), Income Contingent Repayment (ICR), or Pay As You Earn (PAYE). All of these programs are offered through the Federal Student Loans website and can save you money now while building a positive payment history at the same time.

For private loans, there are other options available to help you pay off your student loans fast. Many of these helpful tips can also apply to federal loans, further supercharging your repayment plans.

Summing It Up

The best way to build your credit in your 20s is through learning the financial habits you need to succeed. These habits include paying your statements on time, staying on top of your installment loans, and ensuring your credit use is within your financial means.

Part of this process involves finding the right credit card to begin your credit journey. Fortunately, we have several articles to help you find your ideal entry-level credit card. Looking for a secured credit card? Here are top picks to consider. Or, maybe you’re looking for an unsecured credit card option for no credit or bad credit?

No matter what option you choose, however, the road to excellent credit requires patience and practice. With discipline, however, you can watch your credit score soar, making your 30s that much more financially stable!


Editorial Disclosure – The opinions expressed on BestCards.com's reviews, articles, and all other content on or relating to the website are solely those of the content’s author(s). These opinions do not reflect those of any card issuer or financial institution, and editorial content on our site has not been reviewed or approved by these entities unless noted otherwise. Further, BestCards.com lists credit card offers that are frequently updated with information believed to be accurate to the best of our team's knowledge. However, please review the information provided directly by the credit card issuer or related financial institution for full details.

About: Cory Santos
Cory Santos

Cory is the senior credit card editor at BestCards, specializing in everything credit card-related. He’s worked extensively with credit cards and other personal finance topics, including nearly five years at BestCards. Cory’s extensive knowledge is an essential part of the BestCards experience, helping readers to live their best financial lives with up-to-date insights and comprehensive coverage of all facets of the credit card space, including market trends, rewards guides, credit advice, and comprehensive credit card reviews.

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