You can build and sustain good credit with a personal loan or credit card by making every payment on time. Even if your score isn’t great right now, if you keep your balances manageable and keep up with payments, you’ll be well on your way to building a good FICO or credit score.

Couple checking their mix of creditThere are five main criteria that the FICO credit scoring model considers. Your payment history weighs most heavily, followed by your credit utilization percentage, the length of your credit history, and how many new credit accounts you’ve recently opened. Having a good mix of credit types is the last thing on the list, but it still makes up about 10% of your credit score.

According to FICO, if you demonstrate the ability to manage different types of debt, that’s an indicator that you’ll be responsible with credit in the future and you pose less of a risk to creditors.

Here are some of the types of credit FICO considers:

A personal installment loan can also add variety to your credit mix. Making set equal payments on time for a personal installment loan can help your score, and demonstrate your ability to handle credit. This may help you in the future when applying for an auto loan or mortgage for a home. When it’s time to get a personal loan, make sure you only work with a qualified lender.

Remember, making all of your payments on time is the most important factor to boosting your credit, but it isn’t the only factor. Be sure to keep your balances manageable, build your credit history length, and have a good mixture of credit types to help build your credit.

For more great information on all things credit-related, head to our 'Basics of Credit' reference page.

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