5 Ways to Build Credit Score By Spending Money

You know the saying “sometimes you have to spend money to make money?” Well, sometimes you have to spend money to make it easier to get access to more money via credit. Discover five ways to build your credit by spending money as well as the benefits of each method below.

Why Build Your Credit?

A good credit score is an important financial asset, so it’s important to improve your score if it’s lackluster. Here are a few positive benefits that come with a good or excellent credit score:

  • Debt can be less expensive. People with higher credit scores typically qualify for the best offers. That means you can reduce the overall cost of debt.
  • You have a better chance of getting approved. Better credit opens doors to more loan and credit card offers because a higher credit score means lenders typically see you as a lower risk.
  • Easier to get utilities and other services. Utility providers, insurance companies and other businesses may ask to run a credit check before providing you with service. Good credit can help you avoid expensive security deposits and may even help you secure lower rates.

Your credit score can also impact your ability to rent a house or apartment or, in some cases, get a job. In short: It’s an integral part of life, so it’s worthwhile to look into money management decisions that improve it.

5 Tips for Building Credit by Spending Money

If you’re proactive about how you deal with and spend money, you might be able to improve your credit score and history while you’re buying things you need. Here are a few options for doing so.

1. Use Store Credit Cards

Have you ever been at the register of your favorite store and had the cashier ask if you wanted to apply for a store credit card? Next time this happens, consider saying yes. Here are a few ways applying for and using a store credit card can boost your credit:

  • Opening the card increases your total credit limit. Credit utilization refers to how much of your revolving credit limits you’re using. Adding another card in the mix—as long as you don’t immediately run up the balance—reduces that ratio. And that can help drive up your credit score.
  • Using the card and paying it down increases timely payments. Buying things you already planned to buy and using your store credit card to pay can help you earn potential points and rewards. Paying off the balance on a regular basis helps you add to your positive-payment history. Timely debt payment is one of the biggest factors contributing to your credit score.
  • It helps ensure you have a revolving credit account on your history. Credit scoring models also take into account whether or not you have a good credit mix. Adding a revolving credit card to your history can help ensure you do.

It’s worth mentioning that having a credit card at one of your favorite stores increases purchasing power, too. Sure, you have to manage the account responsibly, but you also don’t have to wait until payday hits your bank account before taking advantage of a great deal.

flat lay toy car toy house keys with remote control alarm and money on the table

2. Buy a Car

It may seem odd, but sometimes getting a large secured loan for a car is easier than getting a smaller unsecured loan. That’s because the lender knows if you don’t pay, it can repossess and sell the car to get some of its money back.

If you need a car and can get a loan for one, this can help build your credit over time. First, it offers you a chance to make regular and timely payments that help build your payment history. Second, it adds an installment loan to your account—something that helps show you have a healthy credit mix.

3. Buy Furniture on Credit

You don’t have to buy a car to get an installment loan reported to your credit history, though. You could consider a smaller purchase, such as furniture or even jewelry. Ask about loans at the store where you’re buying the item and make sure the lender backing these loans reports to the credit bureaus — not all do.

If the lender that provides loans through the store doesn’t report to the credit bureaus, the loan doesn’t do much to build your credit. In those cases, consider taking out an outside loan, such as one through Wise Loan, to make your purchase.

4. Get a Secured Credit Card

A secured credit card is a way to literally spend money building credit. These credit cards are usually designed with people with no or very bad credit in mind. If you’re having trouble getting approved for an unsecured credit card, you might try this option. The details vary depending on the card, but the concept of secured credit cards works like this:

  • You provide a security deposit to back your initial credit limit. For example, if you pay $250, you get an initial credit limit of $250.
  • The credit card company holds your deposit for a certain amount of time so it can use the money to pay off your balance if you don’t.
  • You can use your credit card as you would any other credit card.
  • Eventually, if you make regular timely payments and use your account wisely, your security deposit is refunded.
  • The credit card company reports to one or more of the credit bureaus the entire time, so your timely payments help build your credit.

5. Use a Travel Rewards Card

If a store credit card doesn’t excite you as a way to build credit by spending money, a travel rewards card might be the better option for you.

This type of credit card provides all of the credit-building benefits of the other as long as you use the account responsibly, keep balances low and make timely payments. But they also usually let you earn rewards, including points, savings or cashback, when you spend on travel expenses such as airfare or hotels.

Is spending money to build credit the right choice for you? In reality, you’re going to have to spend some money eventually just to live life, so you might as well put your purchasing power to work building your credit too.

If you’re ready to get started and want to begin with a personal loan, consider applying today with Wise Loan.

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