My FICO logo $$$$$$$$$$$ 9876 5432 1234 5678 CREDIT CARD KELLY SMITH 11/26 My FICO logo
SCORE
Skip Navigation
  • Why FICO
  • How It Works
  • Pricing
  • Education
  • Community
  • Support
  • Member Dashboard
  • Log In Log Out
  • Start Plan
 
  • Why FICO
  • How It Works
  • Pricing
  •  
  • Education
    • Credit Education
    • Credit Scores
    • What Is a FICO Score?
    • FICO Scores vs Credit Scores
    • FICO Scores Versions
    • New FICO Scores
    • How Scores Are Calculated
    • Payment History
    • Amount of Debt
    • Length of Credit History
    • Credit Mix
    • New Credit
    • How to Improve Your Score
    • How to Build Credit
    • Credit Reports
    • What's in Your Report
    • Credit Bureaus
    • Inquiries
    • Errors on Your Report?
    • Blog
    • Calculators
    • Loan Savings
    • Vehicle Payments
    • How Much Can I Borrow?
    • Should I Consolidate My Credit Cards?
    • Know Your Rights
    • Identity Theft
    • FAQ
    • Glossary
  • Community
  • Support
  • Member Dashboard
  • Log In Log Out
  • Our Products
    • Ongoing Credit Monitoring Track your FICO® Score & identity
    • One-time Credit Reports Be prepared for important transactions
  • How Can We Help
    • Monitor Credit & Identity
    • Mortgages
    • Credit Cards
    • Auto Loans
  • Credit Education
  • Community
  • Support
  • Our Products
    • Ongoing Credit Monitoring Track your FICO® Score & identity
    • One-time Credit Reports Be prepared for important transactions
  • Credit Education
  • Credit Scores
    • What Is a FICO Score?
    • FICO Scores vs Credit Scores
    • FICO Score Versions
    • New FICO Scores
    • How Scores Are Calculated
    • Payment History
    • Amount of Debt
    • Length of Credit History
    • Credit Mix
    • New Credit
    • How to Improve Your Score
    • How to Build Credit
  • Credit Reports
    • What's in Your Report
    • Credit Bureaus
    • Inquiries
    • Errors on Your Report?
  • Blog
  • Calculators
    • Loan Savings
    • Vehicle Payments
    • How Much Can I Borrow?
    • Should I Consolidate My Credit Cards?
  • Know Your Rights
  • Identity Theft
  • FAQ
  • Glossary
View all Financing & Loans articles

Options When You're Building Credit

When you're trying to build credit, credit options can be limited. Here are some solutions that may be accessible to people who are new to credit or rebuilding their credit.

Photo by Tina Nord on Pexels

Whether you're new to credit or you're working on rebuilding your FICO® Scores, it can be challenging to find affordable credit. Some, in fact, can be downright predatory.

But you don't necessarily have to strain your budget to get financing when you need it, and there are options that can be affordable and give you ample time to repay. Here are options that you should consider, along with some you should avoid.

Consider These Options to Build Credit

As you work on building or rebuilding your credit history, here are some potential options that can help you get the financing you need and also reach your goal of establishing a good FICO® Scores:

  • Unsecured personal loans: There are unsecured personal loans that are available to people across the credit spectrum, including for people who are new to credit or are rebuilding their credit history. These loans can still be expensive, with some charging interest rates of up to 36% or more. But they're much cheaper than payday and other predatory loans, and they'll typically give you several months or even years to pay back what you owe.

  • Secured personal loans: If you have cash in a savings account, you could use it as collateral on a savings-secured loan through a credit union. While you're making payments on the loan, you won't be able to access your collateral funds, but they'll be released to you once you've paid the debt in full. While APRs can vary for these loans, credit unions can't charge more than 18%, though there may be additional fees involved.

  • Credit builder loans: Credit builder loans function similarly to secured personal loans, but you don't need to provide the collateral upfront. Instead, when you open the loan, the funds are held for you in a separate savings account. You'll then make payments over a set period of time, and you'll get the loan money once you've made your last payment. This option might not work if you need money now, but if your only goal is to build credit, it's worth considering.

  • Unsecured credit cards: If you want something for everyday spending, you might consider an unsecured credit card. If you're new to credit, fintech companies like Petal offer unsecured cards with low fees and even rewards that don't require a credit score. But if you're rebuilding your FICO® Scores, you may be stuck with cards that charge annual fees and high APRs. Be sure to compare all of your options before you decide on this type of card.

  • Secured credit cards: Secured credit cards function the same as unsecured cards, the only difference being that you need to make a deposit upfront to secure the line of credit. This means you'll need to part with that money until you close the account or the card issuer converts your account to an unsecured card. But some of the best secured cards don't charge an annual fee, and some of them even offer rewards.

As you consider these loan products, take your time to think about your needs and which one would be the best fit to help you achieve your financial goals.

Also, keep in mind that you may be able to apply with a cosigner with some personal loans and credit cards if you can't get approved on your own. If your cosigner has good credit, not only could it improve your odds of approval but also help you score a lower interest rate.

Avoid Payday, Pawn, and Auto Title Loans

Among all of the loan options available to people with lower credit scores, payday, pawn, and auto title loans are arguably the easiest to get. In states where they're legal, they're generally easy to find, and many lenders that offer these loans don't even require a credit check.

But while you benefit from convenience and accessibility, you'll pay dearly for it.

  • Payday loans: On average, payday loans carry a 400% APR, and with a 14-day repayment period, you don't have a lot of time to come up with the cash to pay off the loan. As a result, a study by the Consumer Financial Protection Bureau found that more than 80% of payday loans are renewed or rolled over into a new payday loan.

  • Pawnshop loans: Pawnshop loans are much cheaper than payday loans, but they still charge a 200% APR, on average. They tend to be cheaper because they require collateral, which is typically a piece of personal property with enough value, such as jewelry, a musical instrument, or a firearm. You typically have 30 days to repay, which is more than double the amount of time you get with a payday loan, but it can still be difficult to meet that deadline, which means you could lose your collateral.

  • Auto title loans: Auto title loans are secured by your vehicle's equity, and you can typically get one only if you own the car outright and have the title. They're cheaper than payday loans but still charge an APR of about 300%. Repayment typically lasts 15 to 30 days, which isn't a lot of time to come up with the money, and if you fail to repay, you could lose your car.

It's also important to note that these loan options typically don't report to the credit bureaus, so you can't use them to establish a positive payment history.

If you're considering one of these loans, know that there are other options available that can help you build credit and don't pose such a large threat to your financial security.

Other Ways to Get Money

If you need money now and building credit isn't a top priority, there are other ways to get the help you need without borrowing from an institutional lender.

For example, you may consider borrowing from a family member or friend, though it's important to be careful with this strategy because it could damage the relationship if things go wrong.

You could also seek assistance from the government or a non-profit organization. For example, there are community organizations around the U.S. that can help you cover necessary expenses like rent, utilities, and food.

Whatever your needs are, take the time to research multiple solutions, so you can find the best one for you.

Ben Luthi

Ben Luthi has been writing about money and travel for seven years. He specializes in consumer credit and has written for several major publications and industry leaders, including U.S. News and World Report, Fox Business, Wirecutter, Experian, and Credit Karma.

Estimate your FICO Score range

Answer 10 easy questions to get a free estimate of your FICO Score range

740 - 790
Estimate for Free

Instant Access to Your FICO® Score

90% of Top Lenders Use FICO® Scores. Do you know yours?

Get Access Now!

Page footer

Products

  • Home
  • Why FICO
  • How It Works
  • Pricing

Learn

  • Education
  • Community
  • Support
  • Blog

Company

  • About Us
  • Terms of Use
  • Privacy Policy
  • Affiliate Program
  • Accessibility

Get Our App

  • Download iOS app on the App Store
  • fil_get
    Get Android app on the Google Play Store

Follow Us

  • Twitter
  • Facebook
  • Instagram

Credit Education

  • Credit scores
  • What is a FICO Score?
  • FICO Score versions
  • How scores are calculated
  • Payment history
  • Amount of debt
  • Length of credit history
  • Credit mix
  • New credit
  • Credit reports
  • What's in your report
  • Bureaus
  • Inquiries
  • Errors on your report?
  • Calculators
  • Know your rights
  • Identity theft
  • FAQ
  • Glossary

Copyright ©2001- Fair Isaac Corporation. All rights reserved.

IMPORTANT INFORMATION:

All FICO® Score products made available on myFICO.com include a FICO® Score 8, and may include additional FICO® Score versions. Your lender or insurer may use a different FICO® Score than the versions you receive from myFICO, or another type of credit score altogether. Learn more

FICO, myFICO, Score Watch, The score lenders use, and The Score That Matters are trademarks or registered trademarks of Fair Isaac Corporation. Equifax Credit Report is a trademark of Equifax, Inc. and its affiliated companies. Many factors affect your FICO Scores and the interest rates you may receive. Fair Isaac is not a credit repair organization as defined under federal or state law, including the Credit Repair Organizations Act. Fair Isaac does not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit record, credit history or credit rating. FTC's website on credit.

PRIVACY NOTICE: When you visit this website we collect your browsing activities on our site and use that information to analyze and research improvements to the website, and to our products and services. When you register for our products and services, we also collect certain personal information from you for identification purposes, such as your name, address, email address, telephone number, social security number, IP address, and date of birth. Further information is available in our FICO Data Privacy Policy. For visitors with visual disabilities, access to this website, including our FICO Data Privacy Policy, is available through assistive technologies, such as BrowseAloud, JAWS, VoiceOver, Narrator, ChromeVox, and Window-Eyes. More details on software and accessibility are available at WebAIM.org.