5 Different Ways to Build Credit 

Written by Banks Editorial Team
3 min. read
Written by Banks Editorial Team
3 min. read

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Has your credit score taken a tumble due to financial hardship? If you’re in a better financial position and would like to start building it back up, the good news is you can take actionable steps you can take to reach your goal. The same applies to credit newbies looking to establish a solid credit history to achieve an excellent or good credit score. 

In this guide, you’ll discover the best ways to build your credit score, whether you’ve been using credit for some time or are starting from scratch. 

Monitor and Improve Your Credit Score

5 Ways to Build Your Credit Score

Here are some tips to help improve your credit score or build credit from scratch. 

1. Get a Secured Credit Card

A secured credit card could be a good option if you’re building credit from scratch. You’ll need to make a cash deposit equivalent to the credit limit you’re approved for to open an account. 

Once the card is active, you can use it like you’d use a traditional credit card. With responsible use and timely payments over time, the credit card issuer may upgrade you to an unsecured card and return your deposit.

Or consider a credit builder feature like the Credit Sesame’s to help you build or improve your credit1. It builds on top of the Sesame Cash prepaid debit card and unlike most secured credit card options, it doesn’t come with an annual fee or interest. Payment activity is reported to the three major credit bureaus – Experian, TransUnion and Equifax – each month. 

2. Make on-Time Payments 

It’s rather challenging to build a positive credit history if you don’t pay your lenders and creditors on time. Payment history accounts for 35 percent of your FICO score, which is the most widely used scoring model.

Once an account reaches 30 days past due, the lender or creditor can report it to the credit bureaus. A single late payment could tank your score by up to 100 points. Late payments linger on your credit report for up to seven years, but the impact will lessen over time. 

So, it’s pertinent to pay your bills on time to give yourself the best chance at good or excellent credit. If you have past due accounts that aren’t yet reporting as late, contact the creditor or lender promptly and request a payment arrangement to avoid damage to your credit score. 

Monitor and Improve Your Credit Score

3. Pay Off Outstanding Debts

Are there collection accounts or charged-off accounts sitting on your credit report? They could mean bad news for your score, particularly if they’re relatively new.

If you actually owe the debt, it’s a good idea to reach out to your credit card companies or lenders and request a payment plan with monthly payments you can afford. You can also offer a fair settlement payable in a lump sum. Paying a delinquent debt off may not do much for your credit score, and it won’t automatically fall off of your report, but you could get a slight boost. 

4. Limit Requests for New Credit and Keep Credit Utilization to 30% or less

Each time you apply for new credit, a hard inquiry is generated and could ding your score by a few points. The impact is generally temporary, but several inquiries in a short span could hurt your credit score. So, you want to limit requests for new credit by only applying on an as-needed basis. 

It’s also important to keep your balances on credit cards at or below 30 percent of your credit limit. This is referred to as your credit utilization and accounts for 30 percent of your credit score. If you can get your credit utilization ratio to 10 percent or lower, your credit score could improve even more. Or you can request a credit limit increase to lower your credit utilization without paying down the balance. 

5. Monitor Your Credit Scores and Reports

Most importantly, you want to stay on top of what’s going on in your credit profile as you work to build credit. The Credit Sesame app makes it easy to manage your credit health on the go, and it’s free to get started. 

The mobile app is available on Android and iOS devices and features a variety of financial information, tools and resources, including: 

  • Monthly TransUnion Vantage Score updates 
  • Credit monitoring of your TransUnion credit file
  • Your credit report card which includes an overview of your debt and credit accounts and other factors that impact your credit score
  • Exclusive product offers from Sesame Cash partners to help you lower mortgage, loan, credit card and other debt payments
  • A detailed analysis of outstanding debt obligations and how they affect your credit score
  • Home value estimates for your property (if applicable)
  • Up to $1 million in identity theft protection 
  • A fee-free Sesame Cash account 
  • Sesame Cash Credit Builder that lets you build your credit score1 and earn cash back with everyday purchases2

You can get started by visiting CreditSesame.com to create an account or by downloading the mobile app. It takes 90 seconds or less to get up and running, and you’ll have instant access to all these fantastic features to improve your credit and overall financial well-being.

Credit Sesame

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