How to Build a Positive Credit History AND Still Live Your Life

Published on April 24, 2019 by CreditFresh

Girl standing on a top of a mountain with hands raised to celebrate her achievement

People may tell you that you control your credit score, but if you have a low score it can feel like it’s actually sometimes in control of you.

Sadly, when people stumble into problems with their finances, they sometimes suffer in silence. The stigma associated with money troubles can often lead to feelings of shame and embarrassment. In fact, 1 in 5 Americans admitted that they keep financial secrets from their own spouse. Another 1 in 5 said they don’t even share their salary with anyone.

Bad credit may keep you from getting the new car or the new home that you want. You may be scared to pick up your phone because you know it’s a creditor calling. You may not have a credit card anymore, making it more difficult to rent a car or book a hotel room. You may feel uncomfortable explaining to your friends why you can’t go away on the big weekend trip with them. All things considered, having bad credit can have a significant impact on your life.

But, there are still some ways to build your credit history and impact your credit score! It’s important for you to know that, even though things may feel hopeless right now, you can still build a bright future for yourself.

There is no magic trick to recovering from a bad credit score. Your credit score is a complex and dynamic formula that is made up of a number of factors, so you have to do all the right things to build it up. How long does it take to repair credit? That depends on you, and how well you can stick to your plan.

Today we are going to talk about how to impact your credit score and show you that there are ways to build a positive credit history and live your life. It won’t always be easy (if it was, everyone would have good credit), but if you follow these steps, you can give yourself the opportunity to make steady progress.

Set a Budget and Stick to it

Balance sheet with a calculator and pen

If you’re wondering how to build a positive credit history, it all starts here.

Living on a budget isn’t the end of your social life, it’s taking control of it. If you shift your thinking and look at your budget as an opportunity to take control (rather than seeing it as taking things away), you can really embrace this new way of living and get the maximum benefit from your budget.

A budget forces you to sit down and look at the big picture of your financial life. You can immediately start to see where you may be wasting money. You may realize that you don’t need an expensive gym membership when you already have access to your condo gym, or maybe you didn’t realize how much those lunch outings you’ve been taking cost you. Whatever your indulgences are, having more insight into your finances can help you determine where you should be cutting back.

Little Big Expenses

Looking at your spending habits may help you identify the “little” expenses and the small charges (often subscriptions) that can add up to a big number.

If we asked you how much money you’re spending on subscriptions every month, what would you say? A Spotify account here, an Amazon Prime account there; how much does that all add up to?

Researchers recently gave 2,500 Americans 10 seconds to think about all of their subscriptions and estimate how much they spend every month. The average answer was $79.74. But, when they had more time to add things up, it turns out the average total was actually $111.61, 40% more than their initial estimate.

Sit down and create a thorough and thoughtful budget using your bank statements from the last few months. This may give you visibility into all these little $9.99 and $12.99 monthly charges that make your income mysteriously disappear each month.

Plan the Work and Work the Plan

When you’re in the early stages of learning how to build your credit history, sticking to your budget will be crucial. There are a number of amazing and free online tools you can use to put your budget together, such as:

One of the best ways of making sure that you stick to your budget is making sure you always have access to it. Put your budget on your mobile phone and stay on top of your spending with mobile apps like:

Keeping your budget on your phone keeps you accountable to your goals. It also helps you keep track of impulse buys and know what type of impact these buys will have on the rest of your week.

Prepare for Life’s Surprise Expenses

Person looking under the hood of a car to avoid repair expenses

Some experts say we should save 2-6 months’ worth of living expenses in case of an emergency, and a lot of people roll their eyes at that. Putting that much money away may not seem possible when you’re living paycheck to paycheck.

A recent survey revealed that 40 percent of Americans would not be prepared to deal with a sudden $400 expense. But emergencies happen whether we’re financially prepared or not. So how does one prepare for these emergencies while you’re trying to build a positive credit history?]

What is a Hard Credit Check vs a Soft Credit Check?

Many financial institutions run a “hard check” on your credit, which must be authorized by you. Their inquiry shows up on your credit report and may actually lower your credit score slightly. When you’re looking to build your credit history, you may want to avoid this if possible.

However, a soft check does not lower your score because it’s more like a background check. You do not need to authorize them, they’re not recorded, and they won’t hurt your credit standing.

Because you don’t need to authorize a soft check, it may be done by a potential employer when you apply for a new job. Credit card companies may also run them before they offer you a specific promotion to make sure you qualify.

How Does a Line of Credit Affect Your Credit Score?

If your line of credit is kept in good standing (and your credit isn’t being hurt in any other areas) this may actually impact your credit score. If you’re keeping a low balance and making timely payments this may help you build up positive credit history if the company you borrow from reports payment activity to a credit bureau. This also means that missing payments may negatively impact your credit score, so make sure you keep up with good financial habits when using any financial product.

What does good standing mean? Financial experts disagree on the exact number, but it’s pretty safe to say you will want to keep your balance at 20% below your credit limit. The lower, the better. And of course, you need to make your payments on time or before the due dates.

Highligting definition of credit score with a green marker

Credit Cards For Damaged Credit

Yes, you can get a credit card with damaged credit. If you’ve had difficulty getting a standard credit card from a major company or a department store, you can still get some of the benefits from a secured credit card.

A secured credit card works exactly like a standard credit card. You can use it to rent a car, book a hotel room, or shop online. You can use it to check out at the grocery store, in restaurants, or for cash advances at an ATM.

The key difference is you are providing funds in advance to secure the card and that advance acts as your available credit. If you pay $300, you now have access to a credit card with a $300 limit.

Secured Credit Cards and Responsible Credit Use

Obviously, this card still needs to be used responsibly, just like a line of credit. The lower your balance, the better. You can also build positive credit history if you are making all payments in a timely manner and keeping a low balance. Note that this will only work if you are keeping up with good financial habits in every other area of your life as well.

You might consider paying some of your regular bill payments or subscriptions on a secured credit card, and paying the balance down as quickly as possible.

Don’t Let Bad Credit Hold You Back

Taking control of your finances doesn’t have to mean you put an end to the fun things in life. You may keep your social calendar full, shop online, and travel with a subprime score.

The tips outlined here today might help you do that. If you can make these habits stick, you may live your life to the fullest — even while you’re building up your credit history!

Disclaimer: This article provides general information only and does not constitute financial, legal or other professional advice. For full details, see CreditFresh’s Terms of Use.