Can Monthly Subscriptions Help To Build Credit?

Introduction

From entertainment to clothing to beauty products to even meal planning, there seems to be a subscription service for just about everything these days. Trying to figure out which ones you want can be a difficult decision, and they’re often the first thing to go when you make a budget.

But what if paying for monthly subscriptions could help you build credit at the same time? Well, that might be a real possibility, if you approach it in the right way.

What Are Monthly Subscription Services?

Monthly subscription services are just what they sound like. You pay a monthly fee and, in return, you get an agreed-upon service — whether that’s a seemingly unlimited supply of shows and movies streamed to your TV, music that you can listen to wherever you are, a seasonal selection of the latest skincare products, or a box of meals delivered to your door in time for dinner.

Even though subscriptions are typically “wants” rather than “needs,” they can sometimes provide value beyond what you pay for. And somewhat ironically, that value comes in the form of helping you improve your overall financial situation.

How Subscription Services Can Help Your Credit

Subscription services provide a variety of advertised benefits. They can be fun, they can help you relax, they can save you time, and they can introduce you to things that you wouldn’t have otherwise had access to.

But one benefit that may not be as obvious is their potential to help boost your credit score — as long as you follow certain steps to make it happen.

Pay for the subscription with a credit card

The first thing you need to do is pay for the subscription service with a credit card — not your debit card or bank account. Some services may charge a convenience fee if you use a credit card, so be sure to double check what the terms are before setting it up.

Pay the credit card bill on time

Next, it’s crucial that you pay your credit card bill on time, every time. Positive payment history is hands down the most important factor in improving your credit score. And if you have a grace period and pay off your full credit card balance early (before your closing date), you can also avoid interest charges.

Check your credit report for the activity

The only way for this strategy to boost your credit score is if your creditor reports your positive payment activity to the credit bureaus. They aren’t required to, although most credit card issuers do. Checking your credit report after a month or two is the best way to confirm.

Other Ways To Build Credit

If you don’t want to pay for subscription services with a credit card, there are other ways for you to build credit. But they almost always involve using a credit card and paying your bills on time.

Paying other recurring bills

Chances are you have other monthly bills besides subscriptions — like utility services, cable TV, internet or mobile phone. If so, you can likely pay for these bills with your credit card. As long as you pay your credit card bill on time, every time, your credit score should benefit.

Paying for other purchases

Any regular, timely payments on your credit card will help build your credit. So it doesn’t have to be subscription services or recurring bills. Just don’t let the debt spiral out of control, or the increased credit utilization will have a negative impact on your credit score, and you’ll end up paying interest charges on the balance you carry.

Becoming an authorized user

You might be able to build credit without buying anything at all — by becoming an authorized user on someone else’s credit card account. But this relies on the primary cardholder having positive payment habits, and the activity getting reported to the credit bureaus for both parties, which isn’t always the case.

Bottom Line

Not only can monthly subscription services be a great way to have access to the latest shows, new music, healthy meals, or many other cool things, but they can also help you build credit. However, this plan requires paying for the subscription with your credit card, and then paying the resulting credit card bill on time, every time. If the subscription isn’t in your budget, the whole strategy will backfire.

Not everyone will qualify for every credit card, but there’s a credit card designed for every stage in the financial journey. If you don’t currently have perfect credit but you’re looking for a card that can help build your credit score when you make timely payments each month, see if you pre-qualify for one from Credit One Bank.