Spend Your Way to Improved Credit

Looking at phone with credit card

Paying bills on time and keeping credit account balances low aren't the only steps you can take to improve your credit score. Your monthly expenses may offer a hidden opportunity to rebuild your credit. While spending habits are often to blame for poor credit, it's possible to make them work for you instead of against you. Here's how.

Sign up for free credit reporting bureau services.

Many people are unaware that they can use on-time utility, cell phone, and streaming service payments to help raise their FICO® credit score. Experian, a major credit reporting bureau, allows consumers to use their on-time payment history to instantly boost credit scores. 

Experian Boost™ is a free service that requires users to connect their bank accounts to Experian. Once connected, users select which eligible service providers they want added to their credit file, and the system then scans the accounts for those payments. You get rewarded for paying bills you're already paying. It's an easy way to increase your credit score. 

Pay for basic expenses with a credit card.

When you use a credit card to cover recurring monthly expenses and pay off the balance in full by the due date, you could see a rise in your credit score in a matter of months. Groceries, insurance payments, and other budgeted expenses paid by credit card can help you rebuild damaged credit. However, this type of intentional credit card use comes with a few caveats. 

It's best to avoid making other purchases with the card if it will cause you to exceed the credit limit. Also, if other purchases prevent you from paying off the card within a reasonable time frame, the credit gains you make might be short-lived. Carrying a high credit balance can lower your credit score. 

Talk to your landlord.

If you rent your home, you're likely handing over a monthly payment to a landlord or leasing office at the beginning of each month. Ask them to report those payments to at least one of the major credit reporting bureaus: Equifax, Experian, or TransUnion. Lenders who pull your credit using FICO® Score 9 can use those timely payments to help in their decision to approve or deny credit. 

Use a low-interest-rate personal loan to pay for your next big expense.

An upcoming event or large expense could offer an opportunity to improve your credit while allowing you to earn more on your savings deposit. If you've squirreled away funds to pay for a special vacation or appliance upgrade, consider using a personal loan to cover the costs. This strategy requires that you don't spend more than you've saved for the purchase since you'll use your savings to repay the loan. 

While you could repay the loan in one lump sum using your savings, plan on repaying the loan over three to six months. This will allow the lender to report multiple on-time payments to the credit reporting bureaus. 

A higher credit score is possible with responsible spending. Remember that improving your credit takes time. Live below your means today so you can enjoy a solid financial future.