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NOTE: This quiz is in no way recommending specific colleges or universities (SoFi doesn’t endorse nor are we affiliated with any college or university), but rather the type of college or university that might work with your personality and goals. Above all, this is meant to be a fun tool and a very, very preliminary source of information to supplement your decision-making.

Selecting a college is a personal decision. Broadly speaking, there are three major types of higher education institutions — public universities, private colleges, and community colleges and trade schools. Each of these categories offers students different academic opportunities, and has their own sets of pros and cons.
Continue reading for information that can help you determine which college option might make the most sense for your academic goals and priorities.

Brainstorming a Broad List

According to the most recent information available from the National Center for Education Statistics, as of 2020 were 3,982 degree-granting postsecondary institutions, ranging anywhere from large public universities to more intimate liberal arts colleges, with a wide range of choices in between.

As a first step, consider reflecting on what is most important to you for your college experience. Some factors to consider to help you decide might include:

•   four-year college or a two-year/vocational option

•   public school or a private college

•   nonprofit college or a for-profit college

•   large university or liberal arts college

•   bustling city or a quiet rural environment

•   Stay in-state or venture further away from home

Using your academic goals and personal preferences, create a list of options to explore further. There are a variety of resources available to students such as BigFuture from The College Board or EducationCorner.com. Consider consulting with your guidance counselor for recommendations and suggestions that can help you build your list of potential schools.

If you have friends or family who have already gone through the college application process, ask them about their experience and see what advice they have to offer. This could be insightful as you build your personalized list.

In addition to academic factors like class size and majors, and the location of the school, don’t forget to consider how extracurriculars fit in. Are you interested in playing sports? Do you want to join a college newspaper or TV station? Each of these can impact your college experience so it’s important to think about what you want.

For additional help, we’ve created a quiz that allows you to make a series of high-level choices about what type of college might be best for you:

Prioritizing Your Options

After making your broad list of potential college options, you’ll likely need to prioritize. As you finalize how many college you’re going to apply to, consider including choices from each of these three categories; it can make sense to apply to a couple each of:

•   Match (or target) schools, These are schools where your academic qualifications meet what the school has been accepting as an average freshman, or perhaps slightly exceed them

•   Reach schools, ones where your academic qualifications are below what the school typically requires for average freshmen; perhaps your leadership skills or extracurriculars will make up the difference and you’ll get accepted

•   Safety schools, where you can be fairly confident of acceptance

Continue reading for more information on the different academic options available to students — public universities, private colleges, and community colleges and trade schools.

Public Universities

Public colleges and universities, in general, have been funded by state governments with the goal being to provide people who live there with a college education. This began as early as the 1800s and, even today, state governments pay a significant amount of the operational costs of public universities. They also appoint boards for oversight purposes.

Because public funds are used to subsidize education at a public university, up-front tuition prices are typically lower than at private colleges. Generally, students who live in-state will receive a lower tuition rate than those who are attending the school from out-of-state.

Public universities tend to be bigger in size and scope, offering more degrees than a private college. Class sizes are often larger in public universities than at private colleges. But, larger institutions may offer students access to state-of-the art facilities, libraries, and research. Top-tier faculty and professors are attached to the research potential at large universities, and therefore, students have the opportunity to learn from some of the best in their field.

While public colleges and universities can offer an affordable tuition combined with exceptional facilities and well-respected professors and research opportunities, the large campus and class sizes could be a considerable con for students who thrive on more personalized instruction.

Private Colleges

Unlike public universities, which are funded at least in-part by taxes and state funding, private colleges are independently run institutions of higher education. Generally, private colleges are smaller than public colleges and may offer smaller class sizes and more personalized instruction.

Because the schools are smaller, private colleges may offer fewer choices in majors than their larger public counterparts. That said, the smaller campus and student body can help folster a close-knit community. Like public universities, private colleges also focus on providing students with highly qualified professors and instruction.

Tuition costs at private colleges can be higher than at a public university, however, private colleges may offer more merit aid to students than a public school. It’s usually worth comparing and contrasting financial aid packages to determine which school will be the most affordable for you.

Community Colleges/Technical Schools

Community colleges generally offer associate’s degrees, which typically take about two-years to achieve. After completing their associate’s degree, students can transfer to a four-year college or university to complete their bachelor’s.

Technical schools generally offer a specific certification to students who complete the course of study. Most often, technical schools focus on courses that allow students to build an occupation skill set, so they’re able to start work in their chosen field immediately after completing technical school.

Both technical schools and community colleges can be more affordable than public or private colleges. In addition to the cost of tuition being more affordable, students in these programs may be able to live at home which can help cut down on living expenses.

Community college can be a good option for students who want to explore different fields or cannot afford to go to a four-year college immediately after high school. If you plan to transfer to a four-year college after completing your associate’s at a community college research the minimum transfer requirements at the universities you want to apply to. Consider speaking with an admissions or guidance counselor with any questions.

Financial Considerations

As you decide which colleges to apply for, take into consideration how you can finance your education. Often, students will rely on a mix of federal student loans, scholarships, grants, or private student loans to pay for their education. Scholarships and grants are gift aid that generally does not need to be repaid.

Want to learn more about scholarships, grants, and student loans? Check out SoFi’s Financial Aid 101 series to find funding options for your college education.

Both federal and private student loans need to be repaid. Federal student loans are part of federal financial aid and to apply, students will need to fill out the Free Application for Federal Student Aid (FAFSA®) each year. Private student loans can be a tool to help students pay for college after they’ve exhausted their other options. That’s because private student loans aren’t required to offer the same benefits and borrower protections — things like income-driven repayment plans or deferment options — as federal student loans.

If you decide to apply for private student loans, get a few quotes and carefully consider the loan options and terms available to you. In some cases, you may need to add a cosigner to the application in order to get approved, or to potentially qualify for more competitive interest rates.

As mentioned, it often takes a combination of financial resources to pay for college including savings, scholarships, grants, and student loans. If you have your parent’s support, work with them to create a plan that makes sense for your situation. Guidance counselors may also be able to provide resources on the different types of funding available and information on local scholarships that you might want to apply for.

The Takeaway

Students can choose between public universities, private colleges, or community colleges and technical schools to further their education. The right choice for you will depend on your academic goals, current financial situation, and personality and preferences for learning environment.

Public universities can be more affordable and offer research opportunities, while private colleges generally have smaller class sizes and more personalized instruction. Community colleges are a cost-effective way for students to explore their interests and fulfill their prerequisites before transferring to a four-year university. Technical schools can make sense for students who are passionate about a particular trade or occupation that doesn’t require a four-year degree.

Paying for each of these options may require a combination of resources. Private student loans may be one resource if you’ve exhausted all other options. If you’re interested in adding private student loans into your college funding mix, consider SoFi. Private student loans with SoFi have no origination fees or pre-payment penalties and you can find your rate in just a few minutes in a way that won’t affect your credit score^*.

SoFi offers private student loans for undergraduates, graduates, and parents helping their children pay for their education.

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^*Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Your credit score affects your financial future, so it’s important to know where your score comes from and the different ways it can be calculated. Most important, you should know that the score you’re seeing may not be the score your lender is seeing. Why is this, and what can you do about it?

Two major companies are responsible for billions of credit scores (this is no hyperbole) provided to lenders and consumers: FICO® and VantageScore® Solutions. The difference between VantageScore vs. FICO credit scores is subtle, reflecting each company’s special calculation.

We’ll explain what goes into score calculations. We’ll also tell you where to find your score, how to use it, and which score lenders use in their decisions.

Why Credit Scores Are Important

Before we get into score calculation, let’s review why credit scores are so important. When you need to borrow money, you want to do it as cheaply as possible. This means you want a great interest rate and terms that help you repay your debt as efficiently as possible.

Generally speaking, the higher your credit score, the more likely you are to get the best interest rate and loan terms. Over the course of your life, a good credit score can save you a significant amount of money.

Knowing how to read a credit report and how your credit score is calculated can help you make moves to improve it. Take a look at how the two major players come up with your credit score.

Recommended: What Is a Fair Credit Score?

What FICO Takes Into Account

The Fair Isaac Corporation, more commonly known as FICO, developed the FICO score in 1989. Scores range from 300 to 850. The higher the number, the better your score.

FICO scores are calculated based on how a consumer handles debt and weighted according to the following categories:

•   Payment history: 35%

•   Amounts owed: 30%

•   Length of credit history: 15%

•   Credit mix: 10%

•   New credit: 10%

As you can see, FICO scores give the most weight to your payment history and amounts owed. FICO also considers your length of credit history, credit mix, and new credit.

FICO has multiple versions of their credit scoring models, much like software has multiple updates. FICO provides different scoring models to lenders that serve different needs. Credit card issuers, auto loan lenders, and mortgage originators may use different FICO scores to make lending decisions.

What’s calculated in a FICO vs. a VantageScore is subtly different.

Recommended: What Credit Score is Needed to Buy a Car?

What VantageScore Takes Into Account

VantageScores were developed in 2006 by the three main credit bureaus: Experian, Equifax, and Transunion. Scores range from 300 to 850, just like FICO scores. However, even though the scores are calculated on the same scale, a VantageScore will be different from a FICO score. That’s because the factors, and how they’re weighted, are a little different. VantageScores are based on:

•   Payment history: 40%

•   Depth of credit: 21%

•   Credit utilization: 20%

•   Balances: 11%

•   Recent credit: 5%

•   Available credit: 3%

Naturally, this results in a different score. Since many lenders use FICO Score and consumers often see VantageScores, some lending decisions can take consumers by surprise.

The most common VantageScore versions are VantageScore 3.0 and 4.0. Many banks and credit issuers use VantageScore 3.0 vs. FICO Score.

VantageScore vs FICO: The Differences

The major differences between VantageScores and FICO Score are outlined in the table below. These include the amount of time you have to shop for a loan, the number of categories factored into score calculation, differences in weighted categories, and length of credit history.

	FICO	VantageScore
Shopping Window	45 days	14 days
Categories	5	6
Weighting	Amounts owed weighted more	Payment history weighted more

Recommended: Do Banks Run Credit Checks for Checking Accounts?

Who Tends To Use VantageScore

Some banks and credit card issuers supply VantageScores to their customers for free. Scores are provided largely for consumer education, meaning to help people understand what factors affect their credit score, rather than lending decisions.

Consumers who want to purchase a credit score will find Equifax and TransUnion both advertise a credit score monitoring service that uses VantageScore 3.0 as their model. If you’re comparing Transunion VantageScore vs. FICO, you’ll see that Experian sells a FICO score 8 model.

Recommended: What is The Difference Between Transunion and Equifax?

Who Tends To Use FICO

FICO claims that 90% of top lenders use FICO Score to make lending decisions. Consumers who visit the Experian website will see the credit score monitoring service it offers uses the FICO Score 8 model. You can also purchase your FICO Score directly from FICO.

FICO and VantageScore credit scores are used by a variety of sources to consider your credit history and credit score. These can include lenders, landlords, employers, and insurance companies. (Read more about how credit checks for employment work.)

It’s also possible to get a tri merge credit report, which combines data from the three credit bureaus in one report.

Which Credit Score Costs the Least To Check?

Many people don’t know how to find out their credit score for free. While you are entitled to a free credit report each year from AnnualCreditReport.com, that report won’t include a credit score.

Here are some ways you can find your credit score without having to pay for it:

1.    Bank or credit union. Many financial institutions provide credit scores to their members. The score is often found by accessing online accounts.

2.    Credit card issuer. Many credit card issuers provide credit scores to their customers.

3.    Finance apps. Some money tracker apps and similar businesses provide credit scores to their users.

By the way, pulling your credit report and checking your own score don’t negatively affect your credit score. Learn more about soft credit inquiries vs. hard credit inquiries.

The Takeaway

The two main credit score companies are FICO Score and VantageScore. Each company calculates your score in a slightly different way. Checking your credit is a great way to stay on top of your financial health. Although you may not know exactly which credit score your lender uses to make decisions, you can get a pretty good idea of your range. A number of businesses can provide your credit score free of charge, including banks and credit unions, credit card issuers, and finance apps. Obtaining a credit score from either FICO or VantageScore can help you identify your strengths and the areas where you need to improve.

The SoFi app offers free credit monitoring. In addition to tracking your credit score, monitoring can help you manage your credit utilization and better understand the factors that drive your credit score.

If you like free tools to help you manage your finances, consider SoFi.

FAQ

Does TransUnion use FICO or Vantage?

TransUnion uses the VantageScore 3.0 model.

Which is more accurate: VantageScore or FICO?

Both VantageScore and FICO Score are used to make lending decisions, so the score that is most accurate is the one your lender is planning to use. According to FICO, 90% of top lending institutions use their score to make lending decisions.

Which credit score is better: FICO or TransUnion?

TransUnion provides credit scores from the VantageScore 3.0 model. Both FICO and VantageScore can provide insights into a consumer’s behavior with credit.

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*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Put simply, available credit on a credit card is how much money a cardholder has left to spend in a billing cycle. Being aware of your available credit is key to ensuring you don’t spend beyond your credit limit. Doing so can lead to having a purchase declined or facing penalties, such as a higher interest rate.

Once you know what available credit means, however, you may find that you have further questions. How much available credit should you have? How can you check your available credit? And are there any ways to increase your available credit?

What Is Available Credit on a Credit Card?

Available credit is the amount of money that’s left on a cardholder’s account in the current billing cycle. As a cardholder uses their credit card, the purchase amounts are deducted from their credit limit, which is the maximum amount a cardholder can spend on the card. The remaining amount is what’s known as available credit.

Credit card companies recalculate your available credit every time you make a purchase and when you make a card payment. When you buy something with your credit card, your available payment falls, whereas your available credit rises when you make a payment. One of the key differences between available credit and credit limit is that your credit limit will remain the same, regardless of your spending or payments.

The Importance of Having Available Credit

Knowing your available credit can have a significant impact on your credit card experience. The more available credit you have, the more you can spend on your card. If your available credit is low, you’ll know that you’re nearing your credit limit.

When you aren’t aware of whether you have available credit, the following scenarios can become a reality depending on how your credit card works:

•   You could have a purchase declined if you don’t have the available credit to cover it.

•   You could incur an interest rate penalty, meaning your rate will go up.

•   You could owe an over-limit fee.

•   Your credit card issuer could lower your credit limit, or even close your account after multiple overages.

How to Check Your Available Credit

Cardholders can easily check their available credit in the following ways:

•   On their monthly credit card statement

•   Via the credit card company’s app or website, listed under “accounts”

•   By calling their credit card issuer through the number on the back of their card

Calculating available credit is also fairly straightforward. All a cardholder has to do is subtract their current credit card balance from the account’s total credit limit. In other words, the formula is: credit limit – current balance = available credit.

Make sure to factor in all card-related costs when making this calculation, account fees and interest charges, which will apply if you’re carrying a balance on a credit card.

Recommended: What is a Charge Card?

How Much Available Credit Does It Make Sense to Use?

It’s recommended that credit card users regularly check their credit card balance and refrain from overspending in order to maintain a lower credit utilization rate. This rate reflects how much of their overall credit limit they’re using at a given time.

Credit utilization is not only important for household budget considerations — it also impacts credit score. The lower the credit card utilization rate, the better for a cardholder’s credit score. Aim to maintain a credit-to-debt ratio of no more than 30%, meaning the cardholder has 70% of their available credit remaining on the card account.

Tips for Increasing Your Available Credit

Cardholders looking to boost their available credit can leverage several action steps to get the job done.

Pay Down Your Card Balances

Perhaps the most efficient way to boost your available credit — short of not using the card at all — is to make regular payments. This will keep your credit card debt as low as possible.

For maximum results, pay as much as your household budget allows each month toward your credit card balance rather than only making the minimum payment. Done regularly, this will help to keep your credit card debt down and your available credit up.

Recommended: When Are Credit Card Payments Due?

Request a Credit Limit Increase

Technically, asking for — and getting — a credit limit increase from your credit card company will also boost your available credit. You’ll need good credit and a solid credit card payment history to gain approval from your credit card company though. Also note that the request for a credit limit hike will also lead to a hard credit check, which could negatively impact your credit score.

Once you get approved for a credit limit boost, resist the temptation to overspend now that you have a higher credit limit. To be safe, don’t ask for a credit limit boost unless you’re able to pay off your current balance. That’s a good sign you can handle any potential added credit card debt.

Recommended: What Is the Average Credit Card Limit?

Get a New Credit Card

As long as you’ve done a good job of making timely debt payments and have maintained a stellar credit score, you stand a chance of getting approved for a new credit card with a higher credit limit.

If your new credit card doesn’t offer a higher credit limit, you’ll still benefit from the available credit earned from the new card.

Recommended: How to Avoid Interest On a Credit Card

The Takeaway

Knowing how much available credit you have on a credit card clues you in to how much you still have available to spend. However, you’ll want to avoid using the entirety of your credit limit — meaning whittling your available credit down to $0 — due to the consequences that can have. Not only could that result in a declined credit card or a hiked interest rate, a high credit utilization rate can have implications for your credit score.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

How much available credit should I have?

A good rule of thumb is to have at least 70% of your credit limit available. That will allow you to maintain a credit utilization rate of 30%, which can help you to avoid negative impacts to your credit score.

What does available credit mean on a credit report?

Available credit on a credit report means the amount of credit available to a consumer relative to their outstanding debt. Lenders and creditors want to see consumers with high available credit and low debt balances, as this shows responsible borrowing habits.

Is available credit the amount I can spend?

Yes, available credit is the amount of credit available to a cardholder that they can use.

Why is my available credit low?

Low available credit means you’ve used a large portion of your credit limit. You might aim to spend less in the future to maintain a lower credit utilization rate. In the meantime, keep a close eye on your spending to avoid hitting your credit limit, which can have negative consequences.

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Photo credit: iStock/Ridofranz

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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One of the best ways to build credit with a credit card is through responsible use of your card, such as paying off your credit card in full each month and maintaining a low credit utilization rate. This behavior can help build your credit by showing you’re able to meet your debt obligations, which is something potential lenders want to see.

What if you’re interested in using a credit card to build credit, but don’t yet have a credit card? In this case, there are credit cards that are marketed to those with a limited credit history who want to build their credit. Depending on your personal situation, here’s a look at the best way to build credit with a credit card.

Building Credit With a Credit Card

If you’re looking to build up your credit, a credit card can be a great place to start. Getting a credit card may be easier than getting approved for a mortgage or other type of loan. Plus, unlike most other loans, you won’t have to pay any interest with a credit card as long as you pay your statement balance in full each month.

Recommended: How to Avoid Interest On a Credit Card

8 Tips to Build Credit With a Credit Card

Curious how to build credit with a credit card? Here are eight tips to try.

1. Regularly Pay Your Bills on Time

Paying history is one of the biggest factors that makes up your credit score. If you’re focusing on building your credit score, you’ll want to make sure that you pay your bills on-time, each and every month. If your credit report shows a history of late or missed payments, that can really drag down your credit score.

2. Maintain a Low Credit Utilization Rate

Another factor that helps to build credit is maintaining a low credit utilization rate, ideally under 30%. Your credit utilization rate is your total outstanding debt balance divided by your total credit limits expressed as a percentage. You can lower your utilization rate by paying down debt or increasing your total credit limit.

Recommended: What is the Average Credit Card Limit?

3. Pay Your Credit Card in Full

In addition to paying your credit card statement before the due date, it’s also a great idea to pay the full statement balance every month, if possible. This helps lower your credit utilization rate, which is an important factor in determining your credit score. Additionally, it prevents you from paying interest.

If you’re not able to pay your credit card statement in full, make a plan and consider adjusting your financial habits going forward.

Recommended: What is a Charge Card?

4. Become an Authorized User

If you’re not ready or can’t get approved for a credit card in your own name, consider becoming an authorized user on the credit card account of a trusted friend or family member. You’ll receive a secondary card in your name, also known as a supplementary credit card, and you can benefit from the payment history and good credit of the primary account holder. This can help you when you go to get a credit card for the first time on your own.

However, you’ll want to be careful about whose account you become an authorized user on. If they miss payments or pay late, it can affect your credit score negatively.

5. Use Your Card Regularly

It’s not enough to simply have a credit card — you also have to use it. Using your credit card responsibly shows potential lenders that you’re more likely to be responsible with new debt or loan obligations.

Consider using your credit card to pay some of your monthly bills to keep it in regular use. Just make sure that you’re using credit cards wisely by also setting aside money to pay off the statement in full when it comes due.

Recommended: When Are Credit Card Payments Due?

6. Consider a Secured Credit Card

If you’re having trouble getting approved for an unsecured credit card on your own, you might consider a secured credit card. With a secured card, you typically put down a refundable security deposit, which serves as your credit limit.

As you consistently and responsibly use your secured credit card, you can ask your credit card issuer to increase your credit limit and refund your initial security deposit.

Recommended: Tips for Using a Credit Card Responsibly

7. Limit New Credit Applications

Another factor that goes into determining your credit score is how many new credit applications you’ve had recently. Almost every time that you apply for new credit, such as a credit card or a loan, the potential lender will do a hard pull on your credit report. Having too many of these recent credit inquiries on your credit report can have a negative impact on your credit score.

Recommended: Does Applying For a Credit Card Hurt Your Credit Score?

8. Keep Your Credit Accounts Open

If you’ve had trouble in the past with credit card debt, your first thought might be to cut up your credit card and close your account. One reason to keep your credit card accounts open is that another factor that goes into determining your credit score is the average age of your accounts. Keeping an old account open — especially if it comes with no annual fee — can be a good way to build credit.

Alternative Ways to Build Credit

Besides leveraging credit cards, there are a few other ways to build credit.

Get an Auto Loan

If you’re in the market for a new or used car, consider getting an auto loan. Like a credit card, any auto loan balance or payment history that you have will show up on your credit report. Making reliable and on-time payments on your auto loan can be another positive indicator to your credit score.

Take Out a Personal Loan

Besides an auto loan, a personal loan is another type of debt product that typically shows up on your credit report. With a personal loan, you receive money upfront from the lender and then pay it back over time, with interest. Having a history of on-time payments on a personal loan can be another way to build credit.

Get a Cosigner

If you’re not ready to apply for credit in your own name or are having trouble getting approved for a loan or credit card, you might consider a cosigner. A cosigner is a trusted friend or family member who will sign their name to your loan alongside your own. That makes them also financially responsible for the debt as well, so you’ll want to be careful about who you choose to cosign with. However, it can be a helpful step toward establishing credit.

The Takeaway

Using a credit card can be a great way to build credit — as long as you do it responsibly. Make sure to use your credit card in such a way that you can pay off your full statement balance completely, each and every month. Showing responsible payment history over time and keeping your overall credit utilization rate low are two of the biggest factors that make up your credit score.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

What is the fastest way to build credit with a credit card?

Building credit is usually not something that will happen overnight. Instead, most potential lenders are looking for a history of making on-time payments over time. This can take months or potentially even years to fully build up your credit.

How do you use a credit card to build credit for the first time?

When you get a credit card for the first time, you’ll want to start using the card to pay for some of your monthly expenses. Just make sure to set aside the money for those purchases, so that you can pay your credit card statement in full when it comes at the end of the month. Establishing a history of on-time payments will help you to build your credit, as it shows other potential lenders that you’ll be responsible with your debt obligations.

How long does it take to build credit with a credit card?

Establishing credit is not something that usually happens over a short period of time. Instead, building your credit is something that happens over months, if not years. Demonstrating a history of reliably meeting your debt obligations is one of the biggest factors that makes up your credit score, so always make sure to pay your bills on time and in full, each and every month.

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Photo credit: iStock/Ridofranz

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.



Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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