What Are the Best Ways to Build Up a Credit Score?

Wise Loan Editorial Team
By: Wise Loan Editorial Team
a businessman uses their credit cards through a mobile internet banking app to shop online and make a digital payment

Your credit score is a crucial asset that significantly impacts your personal financial life. It can determine the ease or difficulty of obtaining a loan, the terms offered to you, and the cost of your overall debt. Moreover, various entities, such as utility companies, insurance agencies, and employers, might request to check your credit history before providing services or job opportunities.

Understanding the importance of a good credit score, whether you’re just starting out or rebuilding your credit after financial setbacks, here are some effective tips for building your credit score:

  1. Establish a Credit History with a Personal Loan

To build a solid credit history, you need some debt under your belt. Consider taking out a small personal loan, which not only kickstarts your credit history but also adds an installment account to your credit profile. Demonstrating responsible payment behavior with this loan positively impacts your credit score and shows potential lenders your ability to manage different types of debt.

Remember to choose a lender that reports your on-time payments to credit bureaus.

  1. Obtain a Credit Card

Revolving credit, like credit cards, is another significant factor in building credit. Even if you have bad or no credit, you might qualify for a secured credit card, where you provide a deposit to secure your credit limit. Using the card responsibly and making on-time payments will help establish a good credit history.

Ensure the credit card company reports your payments to all three major credit bureaus before applying.

  1. Prioritize Timely Payments

The most critical factor in determining your credit score is a history of timely payments. It applies to all forms of debt, so ensure you pay your bills promptly. If you anticipate difficulty in making a payment, contact the creditor early and explore potential options. Some creditors may offer a one-time forgiveness option without reporting it as late.

Set up reminders, use calendars, or opt for automatic payments from your bank account to help you stay on track.

Effective tips for building your credit score

  1. Utilize Credit for Non-Traditional Payments

Even if you haven’t yet established traditional credit accounts, you might already be managing rent or utility payments responsibly. While most landlords and utility companies don’t report to credit bureaus, you can benefit from services like Experian Boost™. It allows you to include timely utility, cell phone, and certain streaming service payments on your credit report, boosting your credit score.

  1. Manage Credit Utilization Rate

Credit utilization, the amount of revolving credit you use, is a critical factor in your credit score. Keep your credit utilization rate low by paying off most, if not all, of your credit card debt every month. Limit credit card usage to purchases you can afford to pay in cash.

Building your credit history is an essential step toward achieving financial freedom and stability. A good credit score facilitates loan approvals, better interest rates, and reduced overall debt costs. Start building your credit today with a loan from Wise Loan. Apply now to begin your journey towards a stronger credit profile and financial well-being.

The recommendations contained in this article are designed for informational purposes only.  Essential Lending DBA Wise Loan does not guarantee the accuracy of the information provided in this article; is not responsible for any errors, omissions, or misrepresentations; and is not responsible for the consequences of any decisions or actions taken as a result of the information provided above.

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About the Author

Wise Loan Editorial Team

Wise Loan Editorial Team

Introducing the Wise Loan Editorial Team – a collective of experienced finance and credit professionals dedicated to enhancing your financial path. Our team boasts over three decades of expertise in the finance sector, united in our commitment to deliver reliable and practical financial insights. True to the Wise Loan ethos, our goal is to positively impact the financial well-being of our customers.

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