Over $6 Million Refunded

Get Started

How to Use Credit Constructively

Use Your Credit Constructively

Once you’ve put in the effort to learn about credit, build a good credit history, and maintain that good credit, it’s time to put your credit to use.

Your credit is a tool that you can leverage to help you accomplish your financial and life goals. Think about the things that are important to you and how you can use credit constructively to help you meet those goals. You don’t want to squander your good credit by maxing out your credit limit to buy luxuries, but there are many good reasons to use your good credit to borrow money.

What is Constructive Credit?

The number one question you want to ask yourself when using credit is "What am I borrowing money for?"  If the answer is something that will advance your life, it can be considered constructive credit, also known as honorable debt.  If the answer to the question is that you would just like to purchase something that may not be essential for your life and cannot afford it right now, then it might not be considered the most constructive use of credit.  

There are many constructive reasons to use credit such as paying for higher education with a student loan or building equity in a home with a mortgage.  Even if you don't need credit, simply using it for credit card rewards for example can be very beneficial so long as you know you can pay it off completely by the due date each month and avoid late payments.

The answer for your particular situation and circumstance will vary greatly as to what is constructive or not so you will need to exercise sound judgment.  A lot of the question also comes down to your financial health, which can be measured with the PRO Index in near real-time so that you can know when to borrow and when you might have too much debt already.

Secure Low Interest Rates for Loans

One of the primary advantages of having good credit is that you can qualify for lower interest rates on loans. This is true of many different types of loans, like mortgages and auto loans. Depending on the size of a loan, even a small difference in interest rate can have a major effect on how much you pay.  Every lender will check your credit report prior to each line of credit approval to make sure your credit is good.

For example, someone with good, but not stellar credit may be able to get a thirty-year mortgage with an interest rate of 4%. Someone with a great FICO credit score may get a rate as low as 2.75%.

If both people borrow $250,000 to buy a home, both their monthly payments and the total cost of the loan will be very different.

At 4% APR, the loan will cost $1,194 per month for a total cost of $429,674. At 2.75% APR the loan will cost just $1,021 per month and $367,417 total.

Good credit can save you more than $100 per month and more than $62,000 over the life of the loan.  With bad credit, you may not qualify for the mortgage at all or even other more immediate life needs such as a car loan.

A High Credit Score Saves A Lot When Borrowing

While part of building credit and maintaining good credit is only borrowing money when you need to, having good consumer credit makes debt much more affordable and can save you huge amounts in the long run.  If you are looking for assistance on how to build credit, you can check out our "How to Build Credit Simply" article or sign up to enroll in our automated credit builder product.

Refinance Existing Debt

Even if you have some debt, it’s possible to build good credit by making on-time payments to your bills and keeping your credit utilization ratio low. You may have a great credit score, but still have some high-interest debt leftover from the time that your credit was not as good as it currently is.

Refinancing old debt can help you reduce its interest rate and your monthly payment each billing cycle. That makes it easier to repay the debts and to fit the payments in your monthly budget.

There are lots of ways to refinance debt at a lower rate. One popular strategy is to use a personal loan from your bank or an online lender.

Another strategy that you can use is to take advantage of interest-free offers from credit cards.

Many credit card issuers will offer incentives to customers who sign up for a new card. A common incentive is a grace period where the card issuer has a 0% annual percentage rate (APR). These credit cards work well as a way to use credit without the immediate interest so long as you can pay it off within the grace period.  You can use your strong credit history to sign up for one of these cards and execute a balance transfer of your existing credit card balance on to the new credit card.

As long as you repay the balance before the promotional period ends, you won’t have to pay any finance charges on the debt. Just keep in mind that credit card interest rates are exceedingly high, even for those with strong credit. Make sure you can pay the balance in full before the interest charges begin.  If you only make the minimum payment each month or anything less than the statement balance, you will be paying interest.  Also be sure to pay the credit card bill on-time to avoid late fees.

Sign Up for Rewards Credit Cards

Another credit card-related benefit of having good credit is that you can qualify for rewards cards.

Many of these credit card accounts offer sign up bonuses, which give you a one-time reward for getting the card. Depending on the card you get, these bonuses can be worth $100, $200, $500, or more.

Rewards credit cards also give cardholders benefits whenever they use the card. Depending on the card that you use, you can earn cash back, airline miles, hotel points, or some other form of reward points every time you make a credit card purchase.

Basic rewards cards may offer 1% or 2% cash back but you can find some of the best credit card companies that offer as much as 5% cash back on certain types of spending.

Premium rewards cards often require good credit, but they offer valuable perks beyond the rewards that cardholders can earn.

For example, the American Express Platinum Card offers a bevy of perks, including:

While many premium cards charge hefty annual fees, the perks are often worth the cost of holding the card. Having good credit with a strong credit card payment history means you can qualify for these cards and take advantage of the perks.  Know however, that rewards by themselves should never be a reason to overextend your credit and end up in credit card debt just because you wanted a certain perk.  It's imperative to always make sure you are only using the available credit that you can afford to pay the credit card statement off in full each month from the bank account (typically a checking account) where you hold your cash assets.

Save on Insurance

Depending on where you live, insurers can look at your credit score when you apply for a policy. In general, where this is allowed, insurers will offer better rates to people who have better credit scores. If you have poor credit, you may have to pay a high rate for your auto insurance, even if you have a perfect driving record.

Boosting your credit score can help you save on insurance premiums the next time you renew your policy. It’s worth shopping around with multiple insurers after you’ve improved your credit as you might be able to find a great deal with a new insurance company.


Building good credit takes time and commitment and you need to remember that it’s a process that you can’t rush. It’s also an ongoing process. Once you’ve built credit, you have to keep using it responsibility to avoid damaging your score.

When you have built a strong credit score with the credit bureaus, you can take advantage of the benefits of that score. That can mean refinancing high-interest debt or getting larger loans at more affordable rates.

Whatever your reasons for wanting to build good credit, make sure to use your credit responsibly as a tool to reach your personal finance goals instead of squandering it by getting unnecessary loans.

About the Author

TJ Porter is a Boston-based freelance writer who specializes in bank accounts, credit, and credit cards. He’s written for Bankrate, Credit Karma, MoneyCrashers, DollarSprout and My Bank Tracker, among others. In his spare time, TJ enjoys cooking, soccer, reading, and video games

Harvest helps increase the net worth of the 99% through artificial intelligence and financial automation. To date, Harvest has refunded over $2M in bank fees and interest charges to its members with the ultimate goal of increasing the net worth of everyday Americans by $1 trillion by 2030. Our platform starts with providing immediate relief through bank fee and interest charge refunds, orients a member's financial health with our proprietary PRO Index, and keeps track of net worth over time aided by our suite of financial tools. Check out our 8-step guide on "How to Build Wealth from Nothing" to get started on increasing your net worth.

Disclaimer: Harvest is not providing financial advice. The content presented does not reflect the view of the Issuing Banks and is presented for general education and informational purposes only. Please consult with a qualified professional for financial advice.