How to Build Your Credit – Part 1
Whether you’re building credit from scratch or trying to clean up a few years of setbacks, building your credit isn’t easy. If you’re in never-had-credit camp you might have found out how difficult it can be to get an apartment, take out a loan from the bank, or even get a major credit card. It’s the classic chicken and the egg conundrum – how do you establish credit if no one will give you credit?
To get your credit reporting to the three major bureaus (Equifax, Experian, and Transunion) you will need an account open at least six months and to have the creditors of those accounts to report your information.
There are several other ways to start building your credit we’ll list here:
- Authorized User – This takes a level of trust on someone else’s part. Perhaps a parent, other family member, or your husband, wife, or significant other might be willing to add you as an authorized user on one or more of their credit cards. This isn’t the same as being a co-signer. As an authorized user, you get to build credit without being legally tied to the debt.
- Credit-Builder Loan – Think of this as a reverse savings program. It’s a type of loan designed to do precisely what its name entails – it helps you build credit. In a typical credit-builder loan, you borrow the money but the financial institution holds the money until the loan is repaid. They are usually a part of a credit union program. The best part is your payments are reported to the credit bureaus and is a solid way to help you establish your credit history.
- Find a Co-Signer – Loans and unsecured credit cards can be obtained if you can find a co-signer with a decent credit score and history. Unlike being an authorized user, you and co-signer are both responsible for the balance and making on-time payments every month.
- Your Rent Can Report – Under normal circumstances your rent doesn’t appear on your credit report. However, there are rent-reporting companies out there like RentHistoryPros and Rental Kharma that can take your rental history and have it report positively on your credit report. Your making the payments, you might as well reap some rewards for doing so.
- Try to Obtain a Secure Credit Card – When you’re starting out with little to no credit history, this is practically required. It’s a simple concept: an upfront deposit you make backs the secured credit card. That deposit is your credit limit (usually). The card is used like any other credit card. You use it to make everyday purchases, make payments before the due date, and are charged interest if you fail to pay off the balance every month. That cash deposit you made is their collateral if you fail to make your payments. When the account is closed you then get your deposit back. Don’t keep these kinds of accounts indefinitely, a secured credit card is only meant to be used so can qualify for an unsecured credit card with much better benefits.
Like we said at the outset, this isn’t going to be easy to get started. But the good news is that as long as you follow our advice and make your payments you’ll be on the road to sky high credit scores in no time. If you have questions, we encourage you to contact our credit experts who are here to help. 866-595-6313.