If you merely purchase goods with cash, then surprising one day you may realize that you really don’t have a very high credit ratings as a result of this.
If you want lenders to build your overall financial profile in order to quality for loans, credit lines and increased purchasing power, then you need to take steps to improve your credit score starting today.
Improving your credit score can be done basically by following the steps listed below.
Open a bank account
Lenders and the credit reporting agencies will get an impression that you are not really financially trustworthy if you don’t have a bank account, particularly a checking account. These accounts aren’t actually visible on your credit report; however, bank account information is often requested on credit applications.
Plus, effectively managing your bank accounts will help you establish a good history with your bank and can further assist you in qualifying for credit-based products through your bank as well as other financial institutions.
Apply for a secured credit card
A secured card requires you to make a security deposit to be used as collateral. They will usually issue you a starter credit line that matches the same amount as your security deposit. So if you put down a $500 security deposit, then you can expect at least a $500 starter line of credit.
The credit card issuer will then monitor your account activity and determine your monetary responsibility based on the amount in purchases you make each month and if you pay your credit card bill on time.
Always always always pay on time as this will build your credit. Never default. If you do, the credit card company will keep your security deposit and your credit score and financial record will plummet deeper than it was before.
So DO NOT mess up a chance to prove your credit worthiness. The credit system is just simply too unforgiving and if you mess up it could take you years to rebound. So don’t default; this is no joke.
We live in a credit-based society and this is the way our modern system will judge your financial worth. That’s just the way it is so you must play the system to your advantage.
One important thing make absolute sure of is before accepting any credit card is that the credit card issuer will report your positive payments to at least one (or all) of the major credit bureaus: Experian, Equifax, TransUnion. Otherwise, they’re not helping you to build your credit score and you don’t have time for that.
Once you find a good secured credit card that has proven to you in writing that your positive payments will in fact be reported to at least one of the major credit bureaus, then as I’ve stated before, DON”T MESS UP! Be sure to pay every credit card bill on time and always remember that credit is not free money, just look at it as a 30-day revolving loan that you’ll have access to on demand. This is a great security blanket for you when understand how to use and manage your credit wisely.
Eventually as you build up your credit score, you will find that you’ll be presented with opportunities to graduate from secured cards to unsecured cards. At this point your discipline has really paid off and you’ll be offered even better credit card perks such as higher credit limits, lower interest rates and some cards will even offer youcash back!
Become an Authorized User
You could be listed on someone else’s credit account such as a close friend’s or family member’s account as an authorized user. This will enable you to increase your credit score in the same way that that you would if you were the primary card holder. Same routine, just use your credit account responsibly and do not default.
If you go this route, only become an authorized user on an account that is in good standing. If they’re credit is screwed up, don’t associate yourself with it. Only put yourself in situations that can pull you up, not down. This is how you can rise up fast as an authorized user on someone else’s credit account.
Just be sure that you appreciate and respect the fact that someone trusted you enough to allow you to be an authorized user on their account. Be sure to show your appreciation by using the account wisely – else you will not only damage your finances even more, but you will risk damaging theirs too, because they are the primary cardholder and ultimately responsible if things go south.
Apply for a personal loan
A small personal loan can help you to build your credit worthiness and increase your credit score. You will no doubt be viewed as a trustworthy and financially stable individual when you are eligible to get a personal loan through banks and credit unions.
Once you get the loan, be sure to make all of your payments promptly and this will help to boost your credit score. And just like with when applying for a credit card, before you accept any loan make absolute sure that they will report your positive payments to the major credit bureaus.
Get a co-signer if you must
If you’re just not at the point where you can qualify for a loan on your own, then getting a co-signer would really come in handy. You will be able to benefit from the favorable credit reputation of your co-signer which will help you to qualify for the loan and give you a chance to improve your credit score.
With this arrangement, you must take extra care to always pay on time, because someone believed in you enough to co-sign the loan for you. And if you mess up this opportunity, you will put them in a bad financial situation and possibly even ruin your relationship with them. So don’t get a loan that’s too large for you to handle – and always make sure that you make on-time payments.
The above advice will hopefully help you to take steps toward building (or rebuilding) your credit score. With strong desire and discipline, you can definitely do this and put yourself in a much better financial situation.