10 Healthy Ways to Build Credit


Pay Your Bills on Time

Pay your bills as soon as they come in to ensure a clean credit history.
Pay your bills as soon as they come in to ensure a clean credit history.
Christine Balderas/Getty Images

Since credit reports only track money that you've borrowed, they don't include information about whether you pay your utility bills and monthly rent on time. Likewise, bill payment histories are not used to calculate the most popular credit score -- the three-digit number known as your FICO score.

What most people don't know is that the FICO score isn't the only credit score available to potential borrowers. Some alternative credit scoring models incorporate bill payment histories as one of the main criteria for creditworthiness.

The people behind FICO -- the Fair Isaac Credit Services -- recently introduced the FICO Expansion Score, which culls financial data from "alternative data sources" like rent payments and utility checks to determine creditworthiness [source: Fair Isaac Credit Services].

There's even a company called Payment Reporting Builds Credit (PRBC) that allows you to self-report payments like rent, rent-to-own purchases and utilities. PRBC might not yet have the clout of the big three credit bureaus, but a solid report from PRBC might be enough to get your foot in the door with a lender.

Of course, to earn a good grade from PRBC, you'll have to pay your bills on time religiously. Get into the habit of paying a bill as soon as it shows up in the mail, or consider setting up online accounts to pay all of your bills electronically [source: Burt].