4 Ways to Build and Improve Credit

Updated: Jul 16, 2021

If you're young and just launching into adulthood, you likely don't have much credit. Or maybe circumstances in your past have led to a lower credit score than you'd like. Thankfully, there are some proven ways to improve your credit report and bring your score up.

Why is your credit important?

Financially speaking, good credit can help you reach your goals faster and be a source of security. Putting the work into building a strong credit report can be one of your most valuable assets, offering benefits far beyond your finances.

Why? Credit reports are used for much more than getting a good rate on your auto loan or mortgage. Let's look at who else is taking a peek at your report:

  • landlords

  • insurance companies

  • potential employers

  • banks

  • utility companies

  • private student loan providers

Even if you aren't denied an account or place to live based on your credit, you could be required to provide a larger initial deposit or pay a higher rate.


Most lenders use FICO® scores, so let's focus on how to raise that number. Some areas count more than others in calculating your score, so address the big stuff first.

  1. Pay your bills on time! The single biggest factor in determining your FICO® score (35%) is your payment history. This includes how long you've been making payments, late payments (including how late they were), and any missed payments. Recent history is more important than a late payment from five years ago. Assuming you are living within your means, this is an easy way to make a big difference in that score. Set up online bill pay, build a spreadsheet to make sure you don't miss any payments, put them on Google Calendar, tell Alexa to remind you...whatever it takes! Pay. Them. On. Time.

  2. Keep an eye on debt. Don't max out your credit cards, whether by charging more than you can afford, or only making the minimum payment and causing the balance to grow out of control. Specifically, we want to keep the credit utilization ratio low--max 30%, but lower is better. For example, if your credit card has a $1,000 limit, don't carry more than a $300 balance. Credit utilization (also known as your debt-to-credit ratio) is worth 30% of your FICO® score, so it's another big one. Using credit and making your payments on time strengthens your credit--just keep those balances in check.

  3. Look for easy ways to build positive credit. If you don't have much credit, there are some simple ways to get your report built up without jeopardizing your finances (i.e., don't take out a credit card just to build credit if you won't be able to keep your spending under control and pay it off each month). An often-overlooked way for young people to build credit is rent reporting. For most of us, our housing payment is the biggest bill we pay each month, yet if you're renting, those payments probably aren't contributing to your credit score. Some landlords will report your payments if you request it; otherwise, there are third-party services that will report for a fee. Compare the services to see which companies they report to, how easy they are to use, and how much they charge before deciding.

  4. Go boss-level and take out a credit-builder loan or a secured credit card. These take more effort, but may be some of the only options open to those with very limited history or very poor scores. A credit-builder loan is a small loan (typically less than $1,000) you take out for the specific purpose of building your credit. Unlike a typical loan, you don't get the money upfront--you only get access to the loan amount after you've completed payments. Another option is applying for a secured credit card. These require a deposit that acts as collateral with the credit card company. Exercise caution, however--these types of credit cards typically have some of the highest interest rates.

Now go out and build that credit like an MFer! ✌🏻

More Information:

How Much Bad Credit Will Really Cost You

The History of Consumer Credit in One Giant Infographic

Request your free credit reports from annualcreditreport.com

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