5 Accounts That Help Build Credit and 5 That Don’t

Quick Answer

You can build your credit with credit cards, installment loans, lines of credit, credit-builder loans and authorized-user accounts. However, you won't be able to use a payday loan, cash advance app, checking account, prepaid debit card or utilities to establish a positive credit history.

Woman sitting outside holding credit card and phone

Establishing a strong credit history is an accomplishment that can open financial doors in your life. Not every account can help you reach this goal, however. Your personal credit is based on your history of borrowing money and repaying it as agreed. As you go about managing your finances, it's important to know which types of accounts can and can't help you achieve a good credit score.

Here are some accounts you can use to build your credit, as well as some that you typically can't.

5 Accounts That Can Help You Build Credit

In general, most types of debt can be used to build credit, but here's a quick breakdown of specific types of accounts that can help you achieve your goal.

1. Credit Cards

Most credit cards, both secured and unsecured, report your balance and payment activity to the three major consumer credit bureaus: Experian, TransUnion and Equifax. That said, some cards may not report to all three bureaus, so it's important to verify with the card issuer before you apply.

To build credit with a credit card, use the card regularly and pay your bill on time every month. Note that it's best to avoid using a large percentage of your credit limit to keep your credit utilization rate low.

Ideally, if you can pay your bill in full every month, you'll be able to avoid interest charges.

2. Installment Loans

Installment loans offer a lump-sum disbursement of loan funds you'll pay back in monthly installments over a fixed repayment term.

The most common types of installment loans that can help you build credit include:

To build credit with an installment loan, borrow only what you need and make your monthly payments on time.

3. Lines of Credit

A line of credit is a form of revolving credit, similar to a credit card. During the initial draw period, you can borrow money from your credit line up to its limit, pay off the balance and repeat the process as needed. Then, during the repayment period, it acts more like an installment loan because you'll pay down your remaining balance over a fixed repayment term.

Whether it's a personal line of credit or a home equity line of credit, you can use this type of account to build credit by maintaining a balance and making every payment on time.

4. Credit-Builder Loans

If you're new to credit, you may have a hard time qualifying for a traditional installment loan. If you'd rather avoid credit cards, a credit-builder loan can be an option.

Instead of giving you the loan proceeds upfront like a traditional installment loan, credit-builder loan providers set the cash aside in a savings account or certificate of deposit. Then, you'll make monthly payments for a fixed repayment term. Once you've completed your payments, the provider will disburse the funds to you, plus any interest you may have earned in the account.

5. Authorized-User Accounts

If you can't get approved for a credit card on your own, you may consider asking a family member to add you as an authorized user to their credit card. Once they add you, the account's entire history will be added to your credit reports. If the primary account holder has used the account responsibly, its presence on your reports can help build your credit history.

You can also use the account to make purchases as an authorized user, but you won't be responsible for making payments.

5 Accounts That Don't Help Build Credit

While some of these accounts may have other uses, you typically can't use them to establish and maintain a good credit history.

1. Payday Loans

Payday loans are not only expensive—fees can be equivalent to a loan APR of more than 400% in many cases—but they also don't help you build credit.

If you're struggling to get by and your credit is in poor shape, you may consider some payday loan alternatives, such as bad-credit personal loans.

2. Cash Advance Apps

Cash advance apps function as a payday loan alternative, and in some cases, the providers don't charge interest or fees to provide a small advance on your next paycheck.

That said, these apps typically don't report your payments to the credit bureaus.

3. Checking Accounts

You can use your checking account for everyday money management, but your regular activity, including debit card purchases, won't help you build credit.

Deposit accounts in general can help you safeguard your cash—and can even reward you with interest—but they won't be added to your credit report. Deposit accounts include:

  • Savings accounts
  • Checking accounts
  • Money market accounts
  • Certificate of deposit accounts
  • High-yield savings accounts

4. Prepaid Debit Cards

Prepaid debit cards sound similar to secured credit cards, but they function differently. Instead of requiring an upfront deposit to secure a credit line, a prepaid card only allows you to spend what you load onto the card, so there's no debt element.

As a result, you can't use a prepaid debit card to build credit.

5. Utility Accounts in Some Cases

Utility providers may run a credit check when you apply for an account, but this soft credit check won't affect your credit score. If you don't pay your bill, however, it could be sent to a collection agency, which may report to the credit bureaus.

In most cases, you can't use your monthly utility payments, including your cellphone bill, to build your credit history—but using Experian Boost®ø offers an exception. You can use Experian Boost to get credit for accounts that don't traditionally help build your credit, including utility accounts, rent and even some streaming subscriptions. Simply register and link the accounts you use to pay your bills, and you'll be able to add positive payment history to your Experian credit report. Doing so could result in an instant boost to your FICO® Score powered by Experian.

How Long Does It Take to Build Credit?

To generate a FICO® Score, you'll need at least one credit account open for six months or longer. As you add more accounts to your credit file, you'll be able to fill out your credit profile and improve your credit score.

That said, it can take several years to establish a solid credit history, so it's important to avoid offers for fast credit-building services—they might be scams.

To accelerate the process, consider signing up for Experian G o™, which provides free access to your FICO® Score and Experian credit report, as well as resources and insights to help you learn about credit and build your credit history.

The Bottom Line

Building credit can feel like a monumental task, especially if you don't know where to start. It's important to understand what can help you establish your credit history and what can't so you can take meaningful steps in the right direction.

While you're at it, continue to monitor your credit to track your progress and learn more about how your actions impact your credit score.