This article will teach you how to build credit and improve your credit score. The 4 ways to build your score are to pay off debt, increase your credit line, spend within your means, and avoid bad credit loans. You can learn the basics of credit here.

Pay Off Debt to Build Credit

If you’re looking to build credit quickly, there’s no better place to start than by paying off debt. By paying down your debts, you’ll improve your credit score, which will help you qualify for lower interest rates on new loans. I recommend the snowball method for paying off debt. This means that you’ll pay the minimum on your debts with higher amounts, and put as much as you can on your lowest debt until you pay it off. When that one is paid off, you’ll move to the next one.

The snowball method works because it forces you to focus on what you owe first. You won’t be able to ignore your debts if you’re constantly reminded of them. Plus, once you’ve paid off one debt, you’ll feel more motivated to keep going. Once you’ve paid off your first debt, you’ll think “I can get the rest paid off, too!” And then you’ll want to get rid of the rest of your debts.

Another good debt payoff method is the avalanche method. This works by putting any extra money you have toward your highest interest debt, then to the next highest interest debt, and so on until you’ve paid off your debt. This method helps you avoid paying as much interest as you possibly could.

You can always choose one method and switch it up when you decide something else will work better for you. Whichever method you choose, you will be on the path to building your credit!

One free website I like that helps people make a plan to pay off debt is https://extension.usu.edu/powerpay/. You can plug in all your debts – the amounts, interest rates, terms, etc., and it will make a chart of the various ways you can pay off your debt so that you can compare and decide which option is best for you.

Increase Your Credit Line

One way to build credit is to increase your credit line. As long as you keep your spending at about 10% to 20% of your total credit availability, this will help you build credit. Be careful of lifestyle creep though. More credit = more responsibility.

The best way to increase your credit line is to pay off any outstanding debt. If you have a balance on your current credit cards, call your creditors and ask them if there are any payment plans available. You might be able to lower your monthly payments or extend the length of time you pay each month.

Another option for building your credit and increasing your credit line is to consolidate your existing balances into one new loan. If you have multiple loans from different lenders, consolidating them into one new loan could save you hundreds of dollars per year. You will likely have a lower interest rate on the debt consolidation loan than you had on your credit cards, which is one thing that will help lower the amount of interest you pay over the life of the debt. Another good thing about getting a debt consolidation loan is that your payment amount each month will be stable and predictable. You just have to be careful not to add to your credit card debt again.

You can also consider applying for a secured credit card. This type of card requires you to put down some cash upfront but will allow you to earn rewards points, and like with an unsecured credit card, you can incur interest charges if you do not pay it off every month. WalletHub has a list of secured credit cards and compares them here.

Spend Within Your Means

It’s easy to fall into the trap of buying things you can’t afford. This is especially true when you’re trying to build up your credit score. However, if you do end up with too much debt, you might find yourself unable to pay back what you owe. In addition, having too much debt can make it harder to get approved for future loans.

If you want to avoid falling into this trap, try using a budget instead of relying solely on credit cards. A budget helps you set aside money each month for specific expenses, such as rent, groceries, utilities, and other bills. By sticking to your budget, you’ll be able to see exactly where your money goes and whether you’re spending too much.

For example, you could create a checking account specifically used to pay off your credit card, and you could fund that account with your spending limit. Make sure to pay close attention to he amounts you are spending. You could check your balance weekly and pay it off when you check it, or you could set it to auto-pay the balance a couple of days before the due date. Either way, paying attention to your balance means you are much less likely to overspend and fall into the debt trap.

Avoid Bad Credit Loans

If you need to borrow money, there are several options available to you. You can apply for an unsecured loan through a bank or other financial institution. Or, you can apply for a secured loan, where you pledge something as collateral against the loan. A third option is to use a bad credit loan. This type of loan is not ideal and should only be used as a very last resort. These loans are designed to prey on people who have had trouble getting traditional financing because of low credit scores. These loans can have significantly high interest rates and can hurt your chances of paying off your debt.

The best way to avoid bad credit loans is to get a personal loan from a reputable lender. When applying for a personal loan, be sure to shop around for the lowest interest rate possible. Also, keep in mind that if you default on your payments, your credit will take a heavy hit, and it will be harder for you to get credit from lenders in the future.

If you are in a place where you are looking into bad credit loans, you are likely better off saving to get a secured credit card to build credit.