If you want to build up a good credit history, it will probably require that you go into some kind of debt. Once lenders see that you’re able to responsibly pay off your debts, they’ll be more likely to approve you for credit cards and loans in the future. There are a number of strategies you can take to create a credit history for yourself. Taking out a personal loan is one of them. Personal loans usually offer much lower interest rates than credit cards, so they can be a more financially sound option. Here are three ways to responsibly build your credit with a personal loan.

Research Different Options

When making any major financial decision, it’s wise to examine all of your choices and not rush into anything. Check out the interest rates and terms of several lenders, like Union State Bank, before making any concrete decisions. Remember that applying for too many loans at once can hurt your score, so do all of your research before you start filling out applications.

Only Borrow What You Need

If your main objective is to establish your credit history, there’s no need to take out a large amount of money. A personal loan of around $1,000 should be all that’s required to boost your score and establish a history for yourself. Having a larger amount of money to repay will seem more stressful. Plus, you may be more tempted to spend the loan money if you have a larger amount of it.

Make Payments on Time

Credit scores are based on a number of factors, all of which are given different weight. According to FICO, payment history is the most important factor involved in the calculation of your score. Making all of your payments on time is the best way to improve your credit history, and missing one can have a significant impact. Many lenders will send their borrowers a reminder each month when their payment due date is approaching. Some may even have an automatic payment system that will deduct the amount you owe from your bank account each month.

Taking out a personal loan and paying it off on time can be a great way to improve your credit. Personal loans are more difficult to get than credit cards, so handling one responsibly looks good on your credit report. Before applying, try to find a loan that has decent terms but offers you a good chance of approval.