7 Proven Ways to Build Credit without Spending Money

There are many ways to build your credit, and plenty of resources to tell you how to repair your credit. But you should be suspicious of anyone who tells you that you need to spend money upfront to build your credit.

The fact is, there are simple things you can do to build (or rebuild) your credit score without spending a dime. It won’t happen overnight, but the results will be significant, and you will establish good credit habits that can last a lifetime.

Here are seven proven ways you can start building your credit today, for free.

Use Credit

Building credit is just like building muscle—you use it or you lose it. If you’ve been burned by bad credit habits in the past, it can be tempting to stop using credit altogether. But you can’t build your credit if you don’t use credit.

It’s important to repair your credit wisely by avoiding the kinds of habits that may have hurt your credit in the past. Know yourself and make wise choices as you use credit.

Get a Secure Credit Card

A secure card can be a great way to repair your credit without taking on more unsecured debt. Most credit cards use unsecured debt—it’s not protected with any kind of guarantee. Unsecured debt usually comes with extremely high interest rates to protect the lender. And that’s where many borrowers get into trouble.

With a secure card, you put down a deposit—maybe a few hundred dollars—and that deposit determines your credit limit. So you can’t spend more than the amount you’ve already deposited, which means you’ve got a safety net. The secure card acts just like any other credit card, and every time you use it and make payments on it, you’re helping to fix your credit bit by bit.

Keep Your Credit Utilization Low

Credit utilization is often overlooked, but it’s important. This is the amount of your available credit that you’re actually using. So if you have a total credit limit of $10,000 but your monthly balance is only $2,000, your utilization is 20%.

In general, the lower your utilization, the better. The more credit you use, the more it indicates that you’re spending beyond your means. We recommend aiming for the sweet spot of 10% utilization.

Increase Your Credit Limits

One lesser-known way to repair your credit is to increase your credit limits—without increasing your spending. The more credit that’s available to you, the more worthy of it you appear to be. But it’s important not to increase your use of credit.

To increase your credit limits, contact your lenders and ask for a higher credit limit. If you’re in good standing with them (you’ve been making your monthly payments on time), most lenders will be happy to extend your credit.

This method of fixing your credit has the added benefit of helping to lower your utilization, too—increased credit without increased spending means you’re using a smaller percentage of your credit.

Set up Autopay

Automatic payments help ensure that your monthly bills are paid on time. One of the most significant factors that affect your credit score is whether you make your payments on time. You can set up automatic payments for almost any recurring bill, including credit cards, rent, automobile payments, and mortgage.

But be careful to have enough money in your account at all times. Unpaid balances can be reported to the credit bureaus. Set up a schedule that will match your paydays and your payment due dates, and keep track of your spending.

Don’t Close Your Accounts

Many people make the mistake of trying to repair their credit by closing their credit card accounts. The key is to stay in good standing with your accounts—especially your oldest ones. Credit history plays a role in your credit score, so showing a long history with an account that’s in good standing helps to improve your credit score.

Diversify Your Credit

As you use your credit, don’t rely on just one kind of credit. Many people make the mistake of opening more credit card accounts to repair their credit, but it can backfire: several new credit cards means you have more credit with less history. But a major component of your credit score is based on a long credit history. Also, opening several credit cards over a short period makes it look like you’re relying on credit beyond your means.

Instead, diversify your credit to show that you can be trusted with different kinds of borrowing. In fact, about 10% of your credit score is based on credit diversity. This can include car loans, secure cards, personal loans, student loans, or home equity loans.

Building Credit for the Future

You don’t have to be stuck with bad credit or no credit, and there are simple things you can do to build your credit. By making smart decisions and using the right kinds of credit, you can repair your credit score without spending money.

Want to learn more about how to repair credit? Talk to one of our experts today!

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