Improving Your Credit Score By Managing Credit Cards and Loans in 2016

If you are new to credit and looking to build up credit for the first time, you have likely noticed the catch 22 involved with this entire process. Companies and lenders you want to do business with in an effort to build up credit require a credit history in most cases. So it is hard to build up a credit history when you have none. There are some ways around this however, like if you income is very high. Another way around this is to apply for credit in such a low amount that it is safe enough for the lender to lend to you, and in this way you at least get a trade line going.


You can start out with a starter credit card, such as the card offered by CreditOne, very few people get denied this credit card. This will help you build up a credit score within 6 months. The key here is to max the card the 1st month, and pay the entire balance the same month, and wash and repeat that for 2 months, then only use 30% of your credit or less for the remaining months. Doing this will build up a good payment history, and then show that you stay within respectable credit utilization limits.

A credit card or two alone however will not give you the credit report and credit score that you need. You will need 24 months of on time payments to get a credit score of 750, with no missed or late payments on any type of credit. To get the best type of credit report you should ideally also have an installment loan reported to your credit report, on top of one or preferably two credit cards. Personal loans are an ideal installment loan for this purpose. Installment loans are any loan that has regular repayments. A big part of a balanced credit report is a healthy mix of revolving credit like credit cards, and installment loans. When you have this healthy mix, it lets creditors know that you can handle all types of credit, and manage your finances well.

You might be wondering why I say a personal loan is an ideal installment loan for this purpose. There are several reasons why personal loans are ideal when building up credit. The main reason is that you can take out a personal loan for nearly any reason. The next reason is that unlike say an auto loan, you can take out a smaller amount, say $1000 or less, which allows you to build up your credit without a huge strain to your finances. We feature several personal loan lenders on this website that allow you to borrow as little as $300, and while that amount is indeed low, it does build a new tradeline on your credit report.

With time spent hunting down lenders willing to lend small amounts to people new to credit, and a good repayment history, your credit score will go up over a period of 24 months to as much as 750. Building your score to this point is just a matter of finding the right credit card offers and the right installment loans, such as small personal loans. Remember as well to not stretch out your finances to much, and always ensure that you can meet at least the minimum payments per month. With credit cards it is wise to pay more than the minimum, but with installment loans such as personal loans the opposite is true, you do not want to pay off the loan early. Each type of credit has its own rule as far as how to raise your credit score, and the things that lenders look at when reviewing your credit report.