Building a good credit score is essential for financial health. Whether you want to buy a car or a house, rent an apartment, or open a credit card, having a good credit score can make it easier to get what you want, unlock the lowest interest rates, and access larger lines of credit and loans.
Why Are Credit Scores Important?
Your credit score is made up of key factors (that you control!) and is used by banks and lenders to measure your trustworthiness (aka your “creditworthiness”). They want to know, if we lend this guy money, can we trust him to pay us back?
Having a good credit score shows banks and lenders that you use credit responsibly and consistently pay the back debt you have taken on, and they’ll be more likely to loan you cash and offer you a good interest rate. And shaving even a few points off your interest rate by having a better credit score could lead to thousands in savings over time.
How to Build Your Credit
Your credit score is like your borrower report card — and just like in school, there are steps you can take to boost your score and enjoy smooth sailing!
Tip 1: Check Your Credit Report for Inconsistencies
Experian, Equifax, and TransUnion are the three primary credit bureaus, and they not only calculate credit scores, they also keep detailed reports on your credit usage.
Credit bureaus sometimes make mistakes, but they won’t be corrected unless you point them out. For example, if you see a missed payment on your credit report that shouldn’t be there, contact the bureau and dispute the error. Missed payments have a big impact on your score, so it’s worth your effort to dispute it!
Visit annualcreditreport.com to get a copy of your credit report from each credit bureau and check it for inconsistencies. You’re entitled to one free report from each credit bureau every year. Want an easier way to fix errors on your credit report?
Use our credit tracking feature in the MoneyLion app to easily keep tabs on changes in your score, new credit inquiries, and more.
Tip 2: Get Your Bills Reported to Credit Bureaus
Did you know you can boost your credit with all types of payments? You can! You can ask your billers, such as rental companies or cable companies, if they will report your monthly payments to the major credit bureaus. You can also look for services that will do this for you for on all your bills. It’s an amazing way to use your payments to boost your credit score!
Tip 3: Make Payments on Existing Lines of Credit
As we mentioned above, one thing that sinks your credit score fast is late or missed payments. Be sure to make at least the minimum payment each month on all your loans and credit cards. You’ll still rack up interest charges (more on how much here), but meeting the minimum payment amount will prevent bad marks from appearing on your report.
Making consistent, on-time payments is one of the best things you can do to boost your credit score. Here are a couple of tips:
- Get yourself organized! Make a list of your debts (credit card payments, loan payments, car payments) and the minimum payments owed.
- Set aside enough money each month to at least pay the minimum. Your credit will thank you! And hey, when you have built up a better credit score, you can call up your bank or lender and negotiate a better interest rate to save money!
Tip 4: Use Credit Cards Wisely
Credit cards are great tools for building credit because many credit card providers report your payments to some or all of the credit bureaus. Make sure you read the fine print to find out if your card’s provider is helping you build credit. You’ll want to choose a card that does credit reporting!
That said, because your credit card habits will be reported to the credit agencies, you’ll want to follow the golden rule of paying on time! Furthermore, credit bureaus like to see that you’re not maxing out your credit card, so aim to keep your credit utilization (the percentage of your available that you use) to under 30%. Paying on time and keeping utilization low can boost your score.
Tip 5: Don’t Open Too Many New Accounts in a Brief Period
When you apply for a credit card or loan, most providers will pull your credit (aka perform a credit check). Too many hard credit pulls or credit checks can hurt your FICO score and make you look less stable to lenders. Try to keep hard credit pulls to two or fewer per year. Doing this will require some planning! For example, if you are hoping to apply for a car loan in six months, you’ll want to make sure you don’t have too many other credit applications in the months before then.
Tip 6: Use a Credit Builder Loan
Credit builder loans are small loans designed to help you build credit by reporting your payments to one or more credit bureaus. MoneyLion’s Credit Builder Plus Loan is a low-interest loan up to $1000 designed to give you cash today and improve your credit score by reporting your payments to ALL three credit bureaus every month.
There’s no credit check to apply, and you can get up to $500 today at a low APR. The loan is designed to be easy to pay back with automatic installment payments timed to your pay dates. This loan really works! More than half our members raise their credit score by over 27 points within 60 days of taking the loan!
Building Good Credit Takes Time
A high credit score isn’t built overnight, but it’s totally achievable by following the five tips above. And totally worth it for all the money and stress you’ll save!
Check out Credit Builder Plus and credit tracking tools in the MoneyLion app today. When you have an easy-to-follow plan from us, you’ll be watching your score climb up in no time.