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

Anelle Valdes
a businessman uses their credit cards through a mobile internet banking app to shop online and make a digital payment

Your credit score is an important asset for your personal financial life. Where you fall on the credit score range can make it easier — or harder — for you to get a loan. Your score also plays a role in what types of terms you can get and how much your overall debt will cost. But that’s not all. Utility companies, insurance agencies and even employers are just some of the entities that might request to check your credit history before they offer you service or a job.

You probably see why improving your score or building your credit is a good idea. Whether you’re just starting out and don’t have much of a credit score to speak of, or you’ve made some financial mistakes and are trying to rebuild your credit, here are some tips for ways to build your credit score.

Get a Personal Loan

a couple makes an agreement with a businessman

A good credit score requires a strong credit history. And you can’t really have a credit history without some debt. Credit age and credit mix are two major factors that help determine your credit score.

Credit age refers to how long you’ve had a credit history as well as the average age of your current open credit accounts. If you’re looking forward to your financial future, one of the actions you can take today is to get a small personal loan. That starts your credit history now so that in a few years, you have a respectable credit age.

A personal loan also ensures that you have an installment account in your credit profile. Credit mix is important because it shows potential lenders that you can manage various types of debt well. Installment accounts are one major type of credit, so getting one and paying it as agreed can have a positive impact on your credit score and history.

Make sure if you’re taking out a personal loan for credit-building purposes that you work with a lender that reports your on-time payments to the credit bureaus.

Get a Credit Card

a customer hands a credit card to a clerk

The other major category of credit — aside from installment loans — is called revolving credit. Revolving credit refers to accounts where you have a certain credit limit you can draw from. You then pay back the credit and redraw on it in a revolving fashion.

Credit cards are one of the most common types of revolving credit accounts and are often the easiest to get. Even if you have bad credit or no credit, you may be able to qualify for a secured credit card. These require that you put up a deposit to secure your credit limit. You’re then able to use the card like a normal credit card, and you get your security deposit back after demonstrating that you can manage the account responsibly over a set period of time.

As with personal loans, it’s important to ensure you’re working with a credit card company that reports your on-time payments to the credit bureaus. Check to see whether the company reports to all three major credit bureaus before you apply.

Make All Your Payments on Time

a woman uses a laptop and a credit card to order and make payments online

A history of timely payments is the biggest factor in determining your credit score. So, no matter what type of debt you incur, make sure you’re paying your bills on time.

If you find that you may not be able to make a payment, contact the creditor early and talk to them about options. They may be willing to offer one-time forgiveness without reporting the payment as late to the credit bureaus. In other cases, you may be protected by a short grace period or the lender might be willing to move the due date to a more appropriate time of the month. But you won’t know these are options unless you call.

Otherwise, work to ensure you can make timely payments. Create a budget and follow it, and use paper calendars or smartphone apps to remind yourself about when payments are due. You can also sign up to have payments drafted directly from your bank account automatically, but you still have to remember to make certain that funds are available at the appropriate times.

Get Credit for Other Types of Payments

a paper form with electric bill charges sits on a table

Some people who haven’t yet established installment or revolving accounts are already managing money and making timely payments on other types of bills. If you’re paying rent or utility payments every month, you may be able to get points for those payments on your credit history.

Landlords and utility companies aren’t required to report to the credit bureaus, and most don’t. The only time your rent or utility bill shows up in your credit history normally is if you don’t pay it and the amount goes to collections.

However, you can sign up for a service that Experian now offers through their CreditWorks Basic™ membership—it’s called Experian Boost™* and is completely free and can instantly raise your credit scores. With Experian Boost you can get credit for the bills you are already paying (your timely utility, cell phone, and certain streaming services payments will be reported as a line item on your credit report). This service does not cost a thing, and it’s a great option if you want to boost your credit scores as quickly as possible and need more accounts listed on your Experian credit file. Add your positive payment history to instantly increase your FICO® Score+.  70% of people with low FICO Scores raise their FICO Score with Experian Boost. (FICO scores are another type of credit scoring.  Lenders use borrowers’ FICO scores along with other details on borrowers’ credit reports to assess credit risk and determine whether to extend credit.)

Managing Your Credit Utilization Rate

a couple looks over a contract

Credit utilization is the second-biggest factor in your credit score next to timely payments. Credit utilization refers to the amount of revolving credit you’re using. For example, if you have one credit card and you maxed out the credit limit, you would have a very high credit utilization rate. That’s not ideal for your score.

One way to build your credit score is to keep your credit utilization rate as low as possible. You do that by paying off all or most of your credit card debt every month or as often as you’re able. Do this by only using your credit card for purchases you could afford to make in cash. Then, you can pay the balance off every month.

Building your credit is an important step to financial freedom and stability. A good credit score helps you get approved for loans and other credit when you need it. Good credit can also help you get better interest rates and reduce the overall cost of your debt. Start building your credit history today with a personal loan from Wise Loan. Apply today.

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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