Did you know there was such a thing as good debt? Debt gets a bad name for a number of reasons, including that people can find themselves caught in a cycle where they can’t get out of it. But the reality of the world is that, for many people, some large purchases are only possible with credit.

The other side of that coin is this: Making some major purchases can help you build your credit so that you have more purchasing power in the future. Find out how this premise works and take a look at seven major purchases that can help you build your credit below.

How Can Making a Large Purchase Build Credit?

Just dropping a ton of cash on a purchase won’t do anything to build your credit. But if you use credit to make the purchase, it offers you an opportunity to show that you can handle that credit responsibly.

  • You can make your payments on time. Whether you used a loan or purchased with a credit card or line of credit, paying the bills on time is important. Your payment history is a significant factor in your credit score.
  • You can manage multiple types of credit. The Federal Reserve notes that credit scoring models consider whether you have a good mix of installment and revolving credit accounts. Making a large purchase can be a good way to add a new account type to your mix.
  • You can build credit age. Large purchases may take a while to pay off. The upside to that is you can lengthen your credit age, which is a significant factor in your overall credit score. How long you’ve had any credit account as well as the average age of accounts on your credit report can make a difference between a good score and a bad one.

7 Ways to Build Credit with a Large Purchase

man and woman buying car from car salesman

Getting a loan (or using a credit card) to build credit can work. But it’s not the right choice for everyone. Obviously, you need to be sure you can afford the purchase in your budget. If you’re unable to make your payments — or if doing so makes it difficult to pay your other debts — then your large purchase can actually hurt your credit.

If you’ve done the math and decided a large purchase is the right step for you, you’ll also want to ensure you’re not just buying something to buy it. Make sure it’s something you need or really want and that you will get value out of it. Here are seven such things you might consider:

1. A Car or Truck

A vehicle is one of the largest commitments on this list. Vehicle loans typically carry a term of three to seven years, depending on your financing agreement. This is one that you definitely don’t want to consider unless you can afford the payments.

One benefit of using a car loan to build your credit is that you can refinance it partway into the terms of the loan. If your plan works and your credit is improved over time, you may be able to get a better rate and save money on the total cost of the loan.

2. Furniture

Furniture is another big-ticket item many people buy on credit. You can purchase chairs, sofas, dining tables or even an entire bedroom suite on credit in a number of ways, including:

  • Using an existing credit card
  • Opening a new credit card for the purpose
  • Taking out a personal loan
  • Applying for financing through the furniture store’s partner

You may be able to increase your cash flow either through the furniture store or by opening a new credit card with a 0% APR offer. These allow you to make payments on the debt over time without accruing any additional finance costs as long as you pay the balance off within the offer period.

3. Jewelry

Fine jewelry stores often offer financing, and you can use a credit card or personal loan to buy such items. If you’re in the market for an engagement ring or a special gift, using credit instead of cash can help make your credit history a bit shinier as well.

4. A Home Computer

Updating your home office with a new computer can help you build your credit. You may also find offers that let you finance a computer without paying any money down (as long as you pay the debt off within a certain timeline). For example, the Newegg store offers a Newegg credit card for this purpose, which lets you increase your cash flow through purchases while building your credit limit.

5. New Home Appliances

The refrigerator going on the fritz or the dryer not doing its job can be annoying problems but they can also bring an opportunity. In this case, it’s the ability to build your credit by buying a new appliance—and then making those payments on time.

6. Home Improvements

Major home renovations are another opportunity to build your credit profile. If you have equity in your home and can access a home equity loan or line of credit, you can use those funds to pay for the home improvements. Then, you can make timely payments to boost your credit profile.

7. A Recreational Vehicle

Cars and trucks aren’t the only vehicles you can purchase with debt to add to your credit history. Boats, ATVs and campers are all other options—though again, these are things you should consider only if you have the ability to make payments and use for them in your lifestyle.

Should you make a huge purchase just to help boost your credit? Probably not. But if you’re going to make a large purchase anyway, using credit wisely to do so might help improve your future financial standing.

Looking for some fast cash to make a purchase and potentially build your credit? Consider applying for a Wise Loan loan today. You may be able to get instant funding to finalize your purchase.





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