 TITLE: What Is Collateral? CONTENT: Can I Use Collateral to Build Credit?\n-------------------------------------\nCollateral can indirectly help you build credit if it backs a secured loan that you repay on time. Payment history is the largest factor in your credit score, which means paying all your bills by their due dates can strengthen your score.\nTimely payments on both secured credit cards and secured loans can help you build credit. Taking out a loan solely to improve your credit score, however, may not be wise if you're not absolutely sure you have the flexibility to afford a new monthly payment. And backing a secured loan with an asset like your car as collateral is risky.\nInstead, consider a secured credit card with a manageable credit limit, or a credit-builder loan, which is a secured loan generally offered by credit unions for the purpose of boosting credit. On a credit-builder loan, you don't need to put up collateral upfront. Instead, the amount you borrow sits in a savings account, and you'll get it back after you've made all monthly payments on time. END