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10 Healthy Ways to Build Credit

Apply for a Small Loan

Loans are a different kind of credit than credit cards. A loan is what's known as installment credit, since you pay back the loan, with interest, in set monthly installments. A mortgage or a car loan is a good example of installment credit. If you want to make one of these major purchases someday, it's a good idea to show lenders that you have some positive experience with installment credit.

For many young borrowers, a student loan is a great way to begin using installment credit. Student loans carry relatively low interest rates and are reasonably easy to obtain. The best part about a student loan is that you don't have to start repaying the loan until six months after you graduate. The downside is that the loan won't appear on your credit report until you start paying it back.

Student loans are just one type of installment loan. Banks and other lenders allow you to take out small loans for just about anything: a used car, an appliance, a vacation or even a personal loan. Keep in mind that the lender has the right to say no, so come prepared to make your case.