How to Build Credit
It is a little tricky to build credit. Without credit history, you can barely get an apartment, credit card, or loan. Where can you get a history of responsible repayment when you cannot even get credit? To get a FICO score, you need one account (or more) that has been active for at least six months and a creditor reporting your activity to credit bureaus for at least six months. Here are tools to help you build credit history: a credit-builder loan, secured credit cards, authorized user status on someone else’s credit card, or a co-signed loan or credit card. Whichever one you decide to use, make sure it gives you a great credit score.
A secured credit card is a great idea if you are building your score from the ground up. You pay a deposit amount equal to your credit limit upfront. Utilize the card just as you would any other credit card: use it to make purchases and you have to make a payment before or on the due date, failure to do so would incur late payment fees and interest. If you do not make the payment, your deposit is taken as collateral. When you close your account, you will get your deposit back. You do not have to use a secured credit card forever. It is for building your score so that you become eligible to get an unsecured card.
Apply for a credit-builder loan; it is a loan that primarily helps you build credit. It is kind of a forced saving system. When you borrow money, the lender keeps it in an account and only releases it when you have repaid it in full. The lender reports your payments to credit bureaus. Community banks or credit unions usually offer these types of loans. With the use of a co-signer, you can get an unsecured credit card or a loan. Both of you should understand that the co-signer is totally responsible for the full amount owed should you fail to pay.
Your significant other or a family member can make you an authorized user on their card. When you are an authorized user, you can access the card and build your credit history. Although you have no legal obligations to pay your share, agree with the cardholder first. They may expect you to pay for your charges or you do not need a card at all from them.
Rent-reporting services like RentTrack and Rental Kharma will put a bill you are paying on your credit report. This can show a history of responsible payments. Some credit companies do not consider these payments but there are those that do and that will qualify you to get a credit card or loan, which will, in turn, build your history for all lenders.
Good Habits Will Help You Build Your Score
Make all your payments on time—even utility bills. Maintain low credit utilization. Do not open several new accounts at the same time, as your average account age will be lower. Keep accounts open and active for as long as you can. Always check your annual credit reports for discrepancies and errors. Add primary tradelines such as credit strong, SELF, kikoff.com, MyJewelersClub, Hutton Chase, Fingerhut, Secured Credit Cards. More information found on Financierpro YouTube channel.
