If you’re looking to make a large purchase this year, you may be wondering if your credit has what it takes. There are several ways to build your credit up prior to making a large purchase, such as a vehicle or a home. You can take steps to either build your credit from scratch or repair your credit.

Get a Copy of Your Credit ReportYour first step would be to get a copy of your credit report from one or all three of the major credit reporting bureaus so you can assess where you stand. In the U.S., you’re able to get a free credit report from each of the three credit reporting agencies (Equifax, Experian, and TransUnion) once a year. On this report, you’ll get to see your actual credit score.

This score is a combination of your history of payments, any outstanding balances you have, the length of your credit history, any new applications for credit accounts, and types of credit accounts you have such as credit cards, auto loans, lines of credit, mortgages, etc.. Also, on your credit report, you’ll find a list of all credit accounts that have ever been opened using your social security number and your status with each account including payments made on time and debt to income ratio.

Creditors use your credit score to assess your creditworthiness when you apply for a credit account of any kind. Your score can also be used to assess your ability to rent a home, obtain a cell phone, or even your security clearance at some jobs.

How to Check Your Credit Report

Now that you’ve had a chance to look at your credit report, what do you see? Do you have late payments? Do you have too many revolving lines of credits open? Is your debt to income ratio too high?

If you have any negative items on your credit report, assess whether these negative items can be fixed. For example, if you have a high balance on a credit card, start working on paying that balance down.

Do you see an account you know you didn’t open or a late payment reported that you know is inaccurate?

Errors on credit reports can happen. There are ways to fix these errors, but it can take time, so you’ll want to fix these as soon as possible. It’s recommended you check your credit report yearly to ensure you don’t have errors that could negatively affect your credit, especially before a large purchase. 79 per cent of consumers that disputed credit report errors were successful.

Build Credit by Paying Your Bills

There are services available online that will add a bill you are already paying regularly onto your credit report in hopes that by adding these bills they will have a positive effect on your credit score. If you do opt to use one of these reporting services, you’ll want to ensure you don’t have any late payments or else adding these bills could affect your credit score negatively.

Build Credit with An Auto Loan

If you choose to apply for an auto loan before building your credit, be prepared to pay much higher interest rates and you may need a cosigner to get the loan. However, consistently paying on an auto loan will definitely build your credit as it will show you are willing and able to make your payments on time.

Build Credit with A Credit Card

Another, more common way, to help is to build credit with a credit card. There are several types of credit cards available and some of them require a good credit score or credit history. If you don’t have a credit history or insufficient history to get a credit card, there are three other types of cards you may qualify for: secured credit cards, student credit cards, and store credit cards.

A secured credit card will require some cash up front to serve as collateral for the card. This card is limited to whatever amount of cash you are able to provide. You’ll want to ensure the card reports to all three credit bureaus as well.

A student credit card can be provided to young students looking to build credit, but these cards can be limited as they have lower limits and higher interest rates.

A store credit card can be offered from a particular retail organization to people with little to no credit history. These store credit cards typically can only be used at the retail organization who is offering them and the interest rates are usually much higher than a typical credit card.

You have a fourth option when using a credit card to build credit. You can become an authorized user on someone else’s credit account. You’ll want to find out if the credit card company reports authorized users to the credit bureaus to ensure you get credit for being on the account.

You will also want to make sure you and the primary cardholder have an agreement on how the card will be used and paid for.

Credit Etiquette

There are several options to build your credit. Consider them carefully and make sure you make the right decision. A credit card will allow you to build your credit while providing you with a useful tool.

For example, if you opt for a store credit card, most stores offer perks for using their credit card. The perks could come in the form of money off your purchases or credit for future purchases. For starting new credit history and building a credit history, credit cards are the simplest and easiest way.

The best way to maintain your credit is to make your payments on time, do not open an excessive amount of credit accounts, and keep your debt to income ratio low.