Having a good credit score can be important for everything from renting an apartment to opening a new credit card. But if your credit score isn’t in the best shape, you can build or rebuild it by practicing positive financial habits.

Building and rebuilding your credit are two different journeys with the same goal in mind. Read ahead to learn about the differences between building vs. rebuilding your credit.

What’s the Difference Between Building and Rebuilding Credit?

Building your credit includes any activity that will add positive information to your credit report, like on-time payments and low credit utilization. When you rebuild your credit, you’re starting from a negative place and reestablishing good habits to boost your credit score.

Both building and rebuilding credit have the end outcome of obtaining a desirable credit score but have different starting points.

How to Build Credit

You might have no history of credit at all if you’re a student just starting out in the real world, or You might have no history of credit at all if you’re a student just starting out in the real world, maybe you’ve always paid for things in cash or debit. In this case, you’ll want to start building your credit score

You can build your credit by doing the following:

Become an authorized user

You can become an authorized user on someone else’s credit card to start building your credit. Anyone can add you to their card but be sure that they have good credit habits; otherwise, you’d be defeating the purpose and making matters worse. You don’t need to make any purchases on their account. As this person uses their card and makes on-time payments, their activity will be reported on your credit report.

Use a secured credit card to build credit

A secured credit card is easy to qualify for because it requires your own money as a deposit to open the line of credit. The deposit will belong to the bank if you default on payments; otherwise, it will be returned to you when you close your card or move to an unsecured credit card.

Stay under your credit limit

Don’t max out your credit card and try to keep your credit utilization under 30% of your credit limit. This way, you’re not overspending and falling behind on payments when they’re due.

Pay credit card bills on time and in full

Making on-time payments on your credit card will help increase your credit score. Pay your credit card statement in full instead of the minimum payment, so you’re not rolling over your balance to the next month.

Rebuilding Your Credit

The need to rebuild your credit can happen if you’ve ever fallen behind on payments due to unemployment or health issues. Unfortunately, one missed payment can quickly spiral into more. Luckily, the process of rebuilding your credit just takes some consistency and commitment.

Rebuilding your credit can include the following:

Paying off debt

Having a substantial amount of debt is one of the main reasons a credit score can start to

suffer, whether you’re missing payments, in arrears or foreclosure, or simply can’t keep up with mounting bills. Paying down debts is the primary way to start rebuilding credit. You can start paying off the smallest debts to the largest. Or pay the debt with the highest interest rate to save money.

Dispute errors on your credit report

Check your credit report for errors like collections you don’t recognize, employers you’ve never worked for, and even a misspelling of your name. Every little bit counts.

Monitor your credit score

Monitor your credit score regularly to help you catch things like fraud, new collections, and improvements on your credit report.

The Bottom Line

Building your credit requires creating financial habits that will positively impact your credit score. To repair your credit, you can take action to remove negative items from your credit report that decreased your score. Both building and rebuilding entail making sound financial decisions. The result is essentially the same but the process can look quite different.