It can seem daunting to ask how to build credit for someone new to finance. Without a credit account, you may feel like you are in a bind. Because of your poor credit rating, lenders are more likely to refuse you. Good news! You can start building your credit as soon as you turn 18. You can easily qualify for the highest interest rates by following these tips.
Timely payment of bills
One way to build credit by paying bills on time is to make a list of all your accounts and note the due date of each bill. It is important to note the name of the lender, the minimum monthly payment, as well as the total amount owed. You can then divide this list according to whether you are paying manually or automatically. Change the due date as soon as possible or use an automated payment system. You can even designate an amount to debit automatically.
Your credit score is more than 30 percent dependent on your payment history. It's important to pay your bills on time. An unpaid bill can cause a late charge or a negative report. Credit reports will likely include information about your credit cards, loans, and sometimes utility and mobile phone accounts. Being punctual with your payments can make a big difference in your credit score.
Multiple credit cards
Although multiple credit cards might sound like a great idea it can also cause financial problems. Multipliering credit cards can be a good way to feel more comfortable shopping, but it can also lead you to major debt and financial problems. Avoid using multiple cards to earn rewards. Stick to one card. One card is the best. Pay it off as soon possible. This will help to keep track your payments and prevent you from overspending.
While credit cards may help improve your credit score in the long-term, having too many can actually make it worse. It is best to only select the cards that you are able to responsibly use, and make minimum monthly payments. Multiple credit card accounts can also lead to higher credit utilization. Be careful with your choices. It is best to maintain at least two credit cards, with a balanced credit score. Your credit score will be better if your payments are tracked.
You can increase your credit limit
A good time to request an increase of your credit limit is after you have graduated from college, or if you have a steady income. It will be easier to make small purchases and increase your spending power. Requesting an increase is much simpler than applying for a new card. An increase can also be requested if you recently transferred to a higher-paying position or have received a raise.
After you have established good credit record with your cards, it is time to call your credit card company and request an increase. While you may be waiting, mention why you deserve a higher credit limit. If you've recently received an increase, tell your credit card issuer about the recent salary increase or your excellent payment history. A higher credit limit can make you more attractive to creditors. But, increasing your credit limit for building credit doesn't mean that you can get a credit card with no interest or fees.
A credit builder loan
A credit builder loan can help you establish credit and improve credit scores. These types loans deposit funds to your account and require monthly installments towards the payment. Your payments are reported by the three major credit reporting agencies. On-time payments can improve your credit score. However, late payments will affect your credit score. Make sure that you have the funds to pay the monthly bills. Credit builder loans can generally be obtained from your bank or credit union.
A credit builder loan does not require a traditional, formal credit check, but some lenders do use your banking history (provided by ChexSystems) to determine your eligibility. You may not be approved for a loan if your check bounces. These loans are offered by many credit unions, but you have to join in order to be eligible. You will need to pay a small membership fee, and occasionally, a donation to a partner organization.