3 ways to build your credit score without going into more debt

Building credit can feel like a rat race. 


We need money to qualify to get credit, but without credit, we can’t build a strong credit history or establish a score to access credit in the first place. At best, this scenario feels daunting, and at worst – well – downright hopeless. 


Have no fear! Here are three tactics for building credit without going into more debt. 

  1. Pay down debt
  2. Close new and costly accounts 
  3. Clear bad marks 


This will apply to those who have already made the leap from no credit to some credit, as well as for those who want to improve historical credit blemishes.


If you haven’t read it yet, please check out our blog about the three major credit bureaus (Experian, Equifax, and TransUnion) and then keep reading here. With both, you’ll be empowered with the tools to improve this very important score.


1. Pay down debt

The first way to increase your credit score is to pay off debt. 


Before you roll your eyes and say I know this, make sure you track the magic number for healthy credit, also known as your credit utilization! Credit utilization is one of the major factors that determine your credit score. This is the percentage of credit you’re using relative to the grand total of credit you have available. 


Take this example, illustrated in the chart below. 

If you have a credit card with a $5,000 maximum, but you’ve only used it for a $50 purchase, then your credit utilization is just 1%. And that’s seen by credit bureaus as a positive sign. 

But, if you’ve maxed out your credit card, then that’s a 100% utilization rate. Higher utilization rates are viewed negatively, and they lower your credit score. You should plan to steadily pay down your debt if that is the case. 

Experts and the credit bureaus say that a good rule of thumb is to shoot for a utilization percentage under 30% This not only helps keep monthly bills low but also shows future lenders that you can responsibly use debt to your advantage.



Ready to figure out your own credit utilization rate? Check out our calculator!*

To get started with your own calculator, just make a copy of the link above and input your credit limits and balances.



2. Close new and costly accounts

Like with much of building credit, there’s no one-size-fits-all approach. You do want to have a credit card(s) or loan account open, but not too many. 


Why? Because the number of new accounts you have open also impacts your credit. Having too many open accounts and lines of credit can mean red flags for lenders. They want to make sure they will be collecting their money back from you.   


There’s no perfect number of lines of credit to have open, because a lot of factors are at play in determining your score. Experian recommends less than three lines of open consumer credit (like credit cards, store cards, and personal loans), in addition to other types of credit. These other debts, like student and mortgage loans, are not in the same category as consumer debt and they are viewed more favorably, so it’s ok to have a few of these open at the same time.


If you look to other sources like Bankrate, SoFi, and Intuit, you’ll see mixed reviews between 2-4 credit cards.


What we can tell you is that you’ll want to keep open older credit accounts, even if you barely use them. This shows that you can handle debt over long periods of time. This positively impacts your score. 


So, you’re really looking to ditch recently opened cards, as well as those with high-interest rates. This is typically associated with department store cards, payday loans, and cards with exorbitant fees.


Take inventory of the cards you have. The more cards you have in your rotation the easier it will be to miss payment which will negatively impact your credit score. Keep the cards that are working for you and ditch those with high-interest rates or payday loans. 


3. Clear bad marks

If you have negative marks on your credit report for late payments or missed bills, cleaning those up can be incredibly helpful to boost your credit score. Now, bankruptcy isn’t so easily removed – that remains visible for at least seven years.


But you can resolve accounts in collections. Pick up the phone and call the number on the bill. Speak to a representative about the challenges you faced. We are human and errors happen. 


Sometimes it’s a simple misunderstanding, like a bill payment that was sent to the wrong address or a check in overdraft. While offering to make a payment plan or even a small contribution to the past due bill, ask if the agent can remove the blemish or reflect that the issue has been resolved. Sometimes they can and it is well worth asking. These are real quick wins you can secure without going into more debt. 


What if I’ve never had a credit score before?

Improving your credit score without taking on more debt is simple if you can show that you have income. Online credit card applications are easy to access. Open a low-interest credit card with a low limit.


Use the card to autopay a recurring bill that is typically under $200, like your cell phone or an app subscription. Be sure to pay that amount off in full every month. This proves responsible credit usage without spending a penny more than normal. Doing this consistently will build and steadily improve your credit score. 


If you’ve been rejected by traditional credit cards, open a prepaid credit card. These secure cards are a great way to build or rebuild your credit. Unlike traditional cards, secured cards typically require you to pay a deposit, which becomes the credit limit you can use for the card. You’ll need to pay the card on time, and those payments will be reported to credit bureaus to improve your credit score. 


Remember, you are entitled to a free credit report each year. This is a great way to see what potential lenders will see and to track if your actions are really impacting your credit score.After you’ve requested your score, read more about the difference between your credit score and your credit history.


Of course, another way to build your credit is not through a credit card at all. If your property is already signed up with Esusu, you’ll be building your credit by paying your rent on time each month (at no cost to you). You can learn more about how Esusu affects your credit score on our blog.


As you work toward building better credit, be sure to check out Esusu’s Credit Education hub. We’re teaming up with organizations like Freddie Mac to bring free credit education courses to everyone.


*Disclaimer: Esusu created this tool to help you understand your credit utilization for informational purposes only. It is not intended as legal or financial counseling.