money

7 Easy Ways to Build Your Credit Score

Jill Huettich

WealthFit Contributor

Good credit isn’t impossible, and takes less time than you think. If you don’t have any credit, or you’re coming back from a credit nosedive, use these habits to launch your credit score back up.

Would you like to enter a very privileged world, only available to a select few?

What if we told you the benefits of that privileged world included easy access to cars, apartments, and even certain jobs?  Sounds like a great deal, doesn’t it?

The good news is that the world we just described is all within your grasp, once you build good credit.

But that’s just the tip of the iceberg! The news gets even better once you realize that your credit score is something you can control long-term—if you practice good spending habits.

Fortunately, good spending habits aren’t so hard to develop, once you know what to do. Read on to learn our 7 top tips for money habits that’ll help you build your credit score and a great credit history.

1. Rate Shop the Right Way

Each time you apply for new credit, your credit score experiences a ding, meaning that it takes a slight dip that lasts for a year.

Take, for example, someone who wants to make a big purchase like a new car. Let’s say they shop around for a good loan rate, then decide to hold off on buying. So, they wait a few months before shopping around for a loan again. Each of those credit applications lowers their credit score.

That person could minimize the impact on their credit score by doing rate comparisons in a shorter time frame. This strategy works, because some credit score models view multiple inquiries—for mortgages, auto loans, and student loans--as just one inquiry.

But you have to get the timeframe right. That window can range from 14 to 45 days, depending on the credit score model being used.

So, for the best results, rate shop for car loans, mortgages, and student loans in a two-week period. That’ll ensure you don’t take any unnecessary negative hits to your credit.

2. Pay Off Small Balances on Credit Cards

Do you like to run a small balance on a lot of different credit cards? Many people do.

While it might seem like a reasonable tactic to use your retail credit cards every time you buy something at the mall and your gas cards whenever you fill up your tank, that’s a no-no, according to credit expert, John Ulzheimer.

It’s bad because every card that has a balance can negatively impact your credit score.

3. Stop Spending Impulsively

Are you an impulse shopper?  If so, you’re hardly alone.

Most Americans report impulse shopping from time to time.  For instance, more than half of them have made an impulse purchase over $100, and 20% of them report buying something on impulse that cost more than $1,000.

If you’re thinking to yourself, “guilty as charged,” you need to curb this bad habit.

While impulse shopping may be fun in the moment, it’s a lot less enjoyable once the “high” from your new clothes, electronics, or whatever, wears off.  Worse still is paying for impulse purchases bought on credit later on.

Rather than allowing this spending habit to wreak havoc on your credit, the next time you see something you “must have,” wait for at least 24 hours.

In most cases, your desire for it will go away altogether. Even if it doesn’t, at least you’ve given yourself time to think through the consequences of buying it.

4. Pay Bills On Time for a Better Credit History

It’s tempting when you first start building your credit history to think that the occasional late payment doesn’t matter too much. Yet, in reality, late payments can have a big impact on your credit score.

In fact, the FICO scoring model—which is what most lenders use—uses your payment history to determine 35% of your total score.

So, instead of viewing late payments as “no big thing,” we recommend setting up a monthly reminder in your phone so you make those payments by their due dates, each and every time.

5. Create a Monthly Budget

It’s way too easy to spend too much money on overpriced lattes and happy hours with friends when you don’t have a budget. That usually leads to one of two scenarios--either you wonder where all your money went at the end of the month OR you run out of money and have to rely on your credit cards until you get paid again.

Rather than falling into that trap, create a budget and stick to it. Once you start tracking your spending money, you’ll make better decisions about where your money goes—and you won’t have to rely on your credit cards as often.

6. Start Saving Money

By saving money on a regular basis, you’ll be building a foundation for a lifetime of great credit.

Let’s face it—nobody starts off with the intention of ruining their credit. However, they do sometimes make dangerous assumptions about their future earning potential.

For instance, many people buy things on credit believing that they’ll pay their cards off in six months or a year. But, perhaps you’ve heard the phrase, “Expect the unexpected”?

When people give themselves long periods of time to pay off credit card debt, they do so at the risk of experiencing an unexpected financial hardship that can take a toll on their ability to pay that debt off.

To prevent scenarios like that, save money from your paycheck each month and start building an emergency fund. Then, should the worst occur, you’ll at least have money set aside so you  can make the minimum payments on all your bills.

7. Use Less Than 30% of Your Available Credit

You might think it’s fine to use your credit cards every day, as long as you pay off your balances in full each month. Yet unfortunately, that isn’t the case if you’re using a lot of your available credit. Whenever you use more than 30% of your credit limit, your credit score takes a hit.

Rather than doing that, we suggest you keep a close eye on your balances, so you don’t go over 30%. If it’s the middle of the month and you suspect you’re going to go over soon, then it’s a good idea to prepay your balance before it comes due.

Knowledge Is Power

The more you know about how your credit score is calculated and what you can do to develop good spending habits, the more control you have over your credit history.

With that control, you’ll have access to the good life we talked about earlier—the one where you have an easier time buying cars, qualifying for mortgages, and getting better-paying jobs.

So, if you’ve been on the fence about changing your money habits, now’s the time—take control of your spending today and watch your financial life improve for the better!

Share

Written By

Jill Huettich

With an MBA in Marketing and a Digital Marketing Strategies certification, Jill Huettich frequently writes about marketing, entrepreneurship and wealth-building strategies.

Read more about Jill

RELATED TRAINING

 in 

MONEY

article
Give Back & Get Back: How to Maximize Your Charity Tax Deductible Donation

Learn how donations can reduce your taxes, how tax laws affect charitable tax deductions, and what you can do to maximize during tax time.

Give Back & Get Back: How to Maximize Your Charity Tax Deductible Donation

Jill Huettich

Read Now
article
Stay Safe & Save: 6 Types of Insurance That Waste Your Money

Insurance keeps us safe— but we want our money to be safe too. Here are 6 types of insurance that waste your money.

Stay Safe & Save: 6 Types of Insurance That Waste Your Money

Jill Huettich

Read Now
article
Do You Have the Best 401(k) Plan? Double-Check Your Fees ...

If you don’t know what your 401(k) fees are, you’re probably leaving money on the table. Don’t let the fees kill your nest egg.

Do You Have the Best 401(k) Plan? Double-Check Your Fees ...

Jill Huettich

Read Now
article
Pack Your Lunch, Pack Your Wallet: How To Save Money on Lunch at Work

Packing your lunch is an easy way to save thousands a year. Learn how to start packing your lunch and stick with it.

Pack Your Lunch, Pack Your Wallet: How To Save Money on Lunch at Work

Jill Huettich

Read Now
article
Are You a Restaurant Server? Here's How To Budget When You Work for Tips

Learn how to budget when you work for tips. How to take control of your finances in the service industry.

Are You a Restaurant Server? Here's How To Budget When You Work for Tips

Jill Huettich

Read Now
podcast
Quit Like a Millionaire

Imagine retiring in your 30's and traveling the world on permanent vacation. Kristy Shen and Bryce Leung live this lifestyle and sit down with Dustin to explain how you can do the same. By going against the norm, investing their money, and quitting their jobs, tune in as they share helpful tips from their new book, Quit Like a Millionaire.

Quit Like a Millionaire

podcast
Start Your Own F.I.R.E. Journey

In this episode, Executive Producer, Scott Rieckens sparks conversation around the concept of retiring early and living financial free and his latest documentary, Playing with F.I.R.E.

Start Your Own F.I.R.E. Journey

podcast
Making Money With a Book

In this page turning episode, Founder of Best Seller Publishing, Rob Kosberg joins Dustin and discusses his tips to becoming a Best Selling Author and the steps you need to take to write and publish the ideal book that positions you as a thought leader in your field.

Making Money With a Book

article
How To Graduate Debt Free

Learn how to graduate with NO student debt by thoroughly researching a career, winning free money, and picking a major with a high ROI.

How To Graduate Debt Free

Erica Gellerman

Read Now
Financial Adulting

Financial Adulting

The 20-Something's Guide to Debt, Investing, and a Wealthy Life

Ellen & Micah Long

Watch Now
Zero Student Debt

Zero Student Debt

How To Make a Smart College Investment and Graduate Debt-Free

Ellen Long

Watch Now
podcast
unHustling - Work Less, Earn More

Join Phil Newton as he and Dustin discuss how to de-stress your life and achieve work-life balance while increasing your income.

unHustling - Work Less, Earn More

Money 101 for Teens

Money 101 for Teens

The Ultimate Guide To Making, Spending, Saving, and Investing Money

JP Servideo

Watch Now
podcast
Wealth Acceleration

Learn how Stuart Arakelian recovered and prospered from the 2008 financial crash—and how it impacted his philosophy on wealth management.

Wealth Acceleration

Wealth That Lasts

Wealth That Lasts

Simple Secrets to Getting (and Staying) Wealthy

Tom McFie

Watch Now
Getting Out of Debt

Getting Out of Debt

How To Eliminate (Bad) Debt and Maximize Your Cash Flow

Michele & John McFie

Watch Now
Smart Budgeting

Smart Budgeting

How to Create a Cashflow-Positive Budget . . . And Stick to It!

Scott & Bethany Palmer

Watch Now
Wealth-Building 101

Wealth-Building 101

How to Get Out of Debt, Boost Your Active Income, and Start Investing for Passive Income

Andy Proper

Watch Now
podcast
Timely Tax Benefits, Wealth Preservation & Leverage

Preserve your hard-earned wealth. Learn to use tax advantages to your benefit and leverage trusts with Supreme Court Counselor Lee Phillips.

Timely Tax Benefits, Wealth Preservation & Leverage

podcast
Cutting the Cable

What’s the cable cutting movement all about? Cable Cutting Academy's Jeremy Edmonds discusses tech and finance hacks to save you money.

Cutting the Cable

article
How to Write A Goodwill Letter That WORKS [Templates Included]

Is a late payment hurting your credit score? There's good news: you write a goodwill letter and ask the creditor to take it off your credit history.

How to Write A Goodwill Letter That WORKS [Templates Included]

Lance Cothern

Read Now
podcast
How To Negotiate a Higher Salary

Want to boost your salary? Rich Jones and Marcus Garrett help you determine your financial worth. Negotiate for the life you deserve.

How To Negotiate a Higher Salary

article
6 Different Kinds of Car Insurance: Which is Right for You?

If you don’t know what your car insurance plan covers—now’s the time to find out. You’ll be surprised by how much you can save.

6 Different Kinds of Car Insurance: Which is Right for You?

Nathan Wade

Read Now
The Hidden Power of Life Insurance

The Hidden Power of Life Insurance

How to Protect Your Ass(ets), Save Smarter, and Start Putting Your Money to Work

Stuart Arakelian

Watch Now