How to Establish Credit and Build Your Credit Score: 7 Surprising Facts

In order to build your credit score, you need to know how to establish credit and keep yourself in good standing.

If you don’t pay your bills on time, if your loans are not paid on time, if you have a heavy overdraft every month – all of these will reflect on your credit history. And the bad credit score bogeyman can haunt your financial dealings for decades.

How to Establish Credit and Build Your Credit Score: 7 Surprising Facts

If that sounds like an exaggeration, think again. Unfortunately, for the vast majority of people who have bad credit scores, this is the reality. Having bad, or even mediocre, credit scores can have a lifelong impact that will be reflected in all your major financial transactions.

Fortunately, there are some proactive moves you can make to avoid a poor credit history. Let’s take a look at some surprising facts you need to know about how to establish credit and build your credit score.

Surprising Fact #1: If you have not applied for credit cards or loans, you will not have a credit history

Not having any past debt at all may seem great, but it’s a bad thing if you want a mortgage or any kind of loan. How do you establish credit? You need to create your credit history by opening a bank account, setting up an overdraft, using credit cards, or even taking out a personal or credit builder loan.

In fact, website US NEWS recommends that if you have managed to stay completely debt-free to this point, you take on a little now. Even if it’s a credit card you pay off completely each month, it will reflect in your FICO credit score.

Surprising Fact #2: Using your credit cards is a great way to improve and build your credit score

However, this also means that you have to pay off the debt on your credit cards, since credit card debit can lower your score.

Essentially, this means you should have a credit card and use it, but make sure that you repay the loan quickly. Delaying your credit card payments can lower your credit score by as much as 45 points!

You can easily check your credit report for FREE on sites like or Credit Sesame. If you have bad credit for any reason, you can seek help from experts on the same sites.

>>Related Post: How To Get A Business Credit Card That Won’t Affect Your Personal Credit

Surprising Fact #3: All unpaid fines, even the small ones, may end up on your credit report

Even though small fines like library late fees and parking tickets are easily forgotten, in some states there is a very good chance that these may be turned over to a collection agency. Collection agencies report these missed fines to the three major credit bureaus, and your credit score takes the hit.

Another late payment that can come back to haunt you on your credit? Medical bills.

Surprising Fact #4: When you’re young, you can begin building credit without a credit card

How? By becoming an authorized user on someone else’s card. Your parents, or another trusted person, can make you an authorized user on their card. They pay the bill, you utilize the card, and you reap the benefit of their good credit.

Of course, you have to choose someone responsible, with good credit, in order for this to be beneficial to you! That’s how to establish credit that works in your favor.

>>Related Post: How Long Does it Take to Build Credit (or Improve Your Score)

Surprising Fact #5: Financing new furniture can lower your credit score

It’s true! When you finance furniture (or other big ticket items) what you’re really doing it taking out a loan. This loan will appear on your credit report and can affect your credit score because you will have higher debt utilization. You want to carry very little debt. 

Additionally, when the financier pulls your credit report, your score will go down a few points. Every time you finance, your score will continue to drop.

However, you can avoid this scenario by simply using a credit card instead. Consider opening a 0% interest card. Most cards offer sign-up bonuses with 0 interest for 12-12 months. This should give you enough time to pay off your loan without paying interest.

While opening a new card can lower your credit score temporarily, if you continue to pay your bills on time, the score will improve.

Surprising Fact #6: To ensure credit health, your score has to range in the upper levels of 700 or more

FICO Scores and VantageScores vary from 300 to 850.

A “good” FICO score ranges from 670 to 739. This won’t get you top rates, but you’ll get decent ones. An “very good” score would be 740 plus.

A “good” VantageScore is between 700 and 749. Why is it different from FICO? Because determining factors are weighed differently between the VantageScore and FICO.

If you are denied a loan or credit application, your lender has to give the reason for the application along with the score they used and when they got it, so that you can verify the details.

Surprising Fact #7: Your income level has no impact on your credit score

The credit bureaus are only worried about how you manage your income and how well you pay off your lenders.

You can always contest your score and improve it with persistence and paperwork.

So, what now?

Now that you know how to establish credit and improve your credit, go ahead and check your credit score at or Credit Sesame. (FYI, checking your own credit will not hurt your credit score!) Free websites like this allow you to check your credit history as many times as you want throughout the year. This may seem unnecessary, but it can actually help you catch inaccuracies in your credit reports quickly. You can repair your credit score and get the bad credit score bogeyman off your back that much faster.

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