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Credit Building: What It Is and Why It Matters

credit score
Fiona Staff3/17/2022

It’s no secret that your credit history and score play an important role in your financial life. Your credit can both open doors for you and close them, depending on whether or not you have built a strong history over the years. 

Whether you’re just looking to boost your credit score or have a specific financial goal in mind (e.g., buying a car, renting an apartment, or taking out a loan), credit building is a great way to set you on the right financial path. Here’s a look at why credit building matters and how to do it.

What is Credit Building? 

As the name implies, credit building is the act of strategically building (and improving) one’s credit. This can be important if you have a negative credit history to overcome, or simply haven’t had enough credit-based accounts in the past. 

With credit building, your goals are threefold. It can help you:

  • Demonstrate responsible credit management

  • Boost your credit score

  • Open the door to better financial products and rates

Why is credit building so important? Well, your credit history is taken into consideration anytime you apply for a new account, like a loan or credit card. Your credit also gets checked when you apply for insurance (whether life, auto, or homeowner’s), to rent an apartment, and sometimes for a job. 

How to Build Credit

Credit building is a many-sided process because your credit score calculation is also multifaceted. No matter which credit scoring formula is used (FICO, VantageScore, etc.), it will take into account your:

  • Payment history (whether you make your payments on time or not)

  • Credit utilization (how much of your total credit limit you’re using)

  • Average age of accounts (how long you’ve been building your credit)

  • Mix of accounts (which different types of accounts you hold)

  • Recent hard inquiries and any new accounts you’ve just opened

With that said, there are many different ways you can build your credit, depending on your situation and how quickly you want to boost your score. 

Building credit could include opening a new credit card account that you responsibly manage and pay off. It could mean limiting the number of inquiries you allow in a given year. Or, it could come in the form of a new loan that you pay back on-time each month.

Looking to build your credit fast? MoneyLion’s Credit Builder Plus helps the majority of users raise their credit score by 42+ points* ― in the first two months alone!

TRY CREDIT BUILDER PLUS

Using a Loan to Build Your Credit

Taking out a loan is one popular way to build credit. With this approach, you would apply for a small loan, whether or not you really need to borrow the funds. You would then pay off that loan each month according to your payment schedule, until the balance is paid. 

You can even put the funds from that loan into a savings account, and use them toward your monthly loan payments!

Over time, your credit score will improve because the account will age, you’ll have a positive payment history, and your credit balance will be kept in check (good for your credit utilization ratio) as a result. Plus, since it isn’t a credit card, there’s no risk of you overspending on the account and racking up additional debt.

The problem is that applying for a new loan (or credit card) can be difficult if you don’t already have a good credit score to begin with. It’s a bit of a chicken and egg situation. That’s where Credit Builder Plus comes in. 

How Credit Builder Plus Can Help

With Credit Builder Plus from MoneyLion, you’re able to take out a personal loan up to $1,000 with no credit check. Good credit, bad credit, no credit… it doesn’t matter. This makes an account accessible to borrowers who might not otherwise qualify for a personal loan.

You’ll just need to link your everyday checking account to Credit Builder Plus. As long as the account has been open for at least 60 days, has evidence of regular income, and maintains a positive account balance, you’ll meet the minimum requirements.

Unlike many other credit building loans, Credit Builder Plus gives you access to a portion of your funds immediately, and the rest once you’ve paid off the loan. It’s like a built-in savings account!

Plus, automatic loan payments can be synced up with your paycheck schedule. That way, you aren’t stuck making payments when your cash flow is tight.

Interest rates on Credit Builder Plus loans are competitive, ensuring that you don’t overpay while building your credit. As you make your monthly payments, your account will be reported to all three credit bureaus, helping you boost your credit score and grow a solid credit history at the same time.

Bottom Line

Credit building is an important part of everyone’s personal finances, helping unlock the door to the most beneficial products, rates, and terms. With Credit Builder Plus from MoneyLion, consumers can build their credit fast, boosting their score by more than 42 points* in the first 60 days alone. And meeting the Credit Builder Plus requirements is simple, with no credit check or minimum credit score needed.

* Credit score improvement is not guaranteed. A soft credit pull will be conducted that has no impact to your credit score. Credit scores are independently determined by credit bureaus. Data was sourced from credit score data from over 74,000 Credit Builder Plus members with an active loan between August 7, 2019, and February 18, 2021. Credit score improvement is not guaranteed. Credit scores are independently determined by credit bureaus. MoneyLion is not a Credit Services Organization. Credit Builder Plus is an optional service offered by MoneyLion.

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Disclaimer: The material provided on this site is not intended to provide legal, investment, or financial advice or to indicate the suitability of any Even Financial product or service to your unique circumstances. For specific advice about your unique circumstances, you may wish to consult a qualified professional. Any information or statistical data sourced by Even Financial through hyperlinks, from third-party websites, are provided for informational purposes only. While Even Financial finds these sources to be accurate, it does not endorse or guarantee any third-party content.

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