How To Build Credit

If you’re freelancing or running your own business, having access to credit makes things much, much easier.

But having access to credit means knowing how to build credit. That can be tough sometimes.

Figuring out the best way to build credit requires a bit of introspection. Most importantly, you need to figure out whether you typically save your money or spend your money. Spenders run a much higher risk of tapping their credit limit and going into debt. But if you only use your credit card to cover purchases you can afford… or, better yet, for emergencies or occasional large purchases only, you’re a saver.

Using credit cards for payments you can afford is actually beneficial for small businesses. Credit card cashback promotions give discounts on purchases, and many credit cards offer discounts on specific products. If your business involve frequent travel, an airline or hotel rewards credit card offers benefits as well.

How To Build Credit If You’re A Spender:

  • Secured credit cards. Secured credit cards are obtained by making a deposit that gives access to a small credit line. After you keep your balance low and pay on time, your credit improves. The more money you deposit to secure your secured credit card, the higher your credit limit will become. If you do not make payments on your credit card, however, your deposit will disappear. But if you make regular payments, your credit will increase.
  • Ask a trusted family member or friend with good credit to add your name to the card account as an authorized user. You don’t need to have access to the credit card number or account information (And, in our opinion, you shouldn’t), but it will help build credit over time.

How To Build Credit If You’re A Saver:

  • Apply for one to two new credit cards annually, which makes it easier to have high credit utilization show up on your credit report.
  • Put one small, recurring bill such as your Netflix or Spotify payment on each card per month.
  • After more than six months of steady credit card use, begin charging all of your bills to your credit card and pay it off in full monthly. Put your charges on the credit card with the best cash back or rewards to maximize revenue.