Credit Building

At some point in your life you will likely need a loan. To get a loan, for school, for a home or for a car, you need a solid credit score. Credit scores affect approval and interest rates. Credit can also affect your ability to obtain certain jobs, approval for rent applications and even setting up utilities for your home. Building credit is a necessary process for ensuring your economic stability. Now, this may sound like a daunting process, but in reality it only takes a bit of diligence and minimal organization skills to start building your credit today.

 

Secured Credit Card

A secured credit card is one of the easiest ways to build credit in a low-risk manner. Secured credit cards work like debit cards. Most secured credit cards will ask for a minimum balance before issuing your card in exchange for a limited credit line. If a secured credit card has a deposit of $150, they may cap you at a $200 credit line. Over time you can put more money on the card for an increased credit line. When you apply for a secured credit card, make sure that you understand the terms and know when and how much you need to pay each month to keep growing your credit. Use your secured credit card to pay for one or two reoccurring bills each month, just like you would with your checking account. This will help to steadily build your credit over time.

 

Pay On Time

If you have any kind of loan, prioritize payment immediately and pay on time every month. Late payments can add up and become derogatory marks on your credit history. This can dramatically lower your credit score if you’ve already got a thin credit history. If you know you will be behind on a payment, reach out to the creditor to make arrangements to get back on track as soon as possible. Late payment history can stay on your credit history for up to 7 years.

 

Make Micropayments

By making more frequent payments throughout the month, you can keep your credit card balances down and improve your credit score.

 

Become An Authorized User

By becoming an authorized user on the account of someone who has a great credit history, you can improve your own scores. This person will generally be a relative or spouse. They do not need to give you your own card, you do not need to have any access to the account or ever use it to be an authorized user. This will fatten up a thin credit history quickly.

 

Request Higher Credit Limits

By raising your credit limit while keeping your balance the same, you can lower your credit use and increase your score without making any big changes to your budget. Make sure you’re maintaining the same credit -building and positive personal finance habits.

 

Keep Credit Cards Open

When you pay off a big credit card debt, your instinct may be to close the credit card to avoid getting into debt again. This is counterproductive to credit building and can have a negative effect on your credit. Keep the credit line open, put one reoccurring bill on the credit card to keep raising your credit score.

 

Building or repairing credit can seem overwhelming, but with a few small changes and the right mindset, you can make a big impact on your credit score relatively quickly.