Are you among those who have never applied for a loan or a credit card? If the answer is yes, then most likely you won’t have any sort of credit history. If you are just planning to start off with your credit journey and need help while building it in the right way, then we are here to help. Before anything else remember a good credit history is the main key to get quick approvals of loans and a wide spectrum of credit cards. However, if you are thinking of how to build credit, you need to create a credit history in a proper manner. Here in this blog, we will guide you with all the steps that are required to build a good credit score right from scratch.
How To Build Credit: The Best Ways
Before we start off with anything else, remember that bad credit can keep you away from financing your education, buying a home, and even getting a job. Apart from these, there are several other reasons why it is so important to build good credit as early as possible. When you start off with your first credit card, all activity related to that card becomes a part of your credit history. Therefore, using a credit card responsibly is a must especially if you want to maintain or even build a great credit score.
- Apply For A Credit Card: Most credit card companies or lenders hesitate to lend money to people who don’t have any credit history. This is mainly because credit history is the one and only way by which they can evaluate whether you will be able to repay a loan amount on time or not. Therefore in order to build a line of credit, you will need a credit card. Applying for a credit card is the easiest and the most common way especially if you are thinking of how to build credit fast. There are two types of credit cards that you can apply for initially, a secured and a non-secured one.
- Secured Credit: A secured credit card can be obtained especially if lenders aren’t willing to give you an unsecured credit card. . Most credit newbies can easily get access to a secured line of credit cards as they are only given against collateral or a security amount. In most cases, these securities are usually in form of a fixed deposit.
- Unsecured Credit: These types of credit cards are the best options when it comes to building a credit score. However, most beginners cannot avail themselves especially because of no credit history. Unlike secured credit cards, the unsecured ones don’t need any security or collateral. If you have a source of monthly income, you can easily try to apply for an unsecured credit card.
- Try Becoming An Authorized User: Another great way to build credit especially if you are having no credit experience is by becoming an authorized user of another person’s credit card. In case you have a spouse or any family member using a credit card, you can try requesting them to make you their card’s authorized user. Since you are new to the line of credit, you must always be careful about the ways by which you are using it. Remember a single slip from your end might cause a direct impact on the credit score of the person whose credit card you are using.
- Never Apply For Multiple Credit Card At Once: Each and every time you are applying for a line of credit, it directly impacts your overall credit score. Therefore avoiding applying for numerous credit cards at once might come off as a credit-hungry person to the lenders. Also applying for multiple cards at the same time can also damage the credit score that you are trying to build up. Remember to always keep your credit balance low and pay the bill on time every month.
- Make Use Of Your Cards Regularly: If you are thinking of how to build credit, make sure that you are making use of your credit card on a regular basis. Since it takes some time to build a good credit score, regular use of credit cards ensures that timely repayment of your dues can create a great credit history. It is also advisable to use your credit card, at least once a month at restaurants, shopping malls, or other places in order to keep it active. This tip is useful not only for those who want to build credit but also for those who have an established credit history.
- Never Forget To Monitor Your Balance To Limit Ratio: All types of credit card generally come with a credit limit. Whenever you start using a credit card, credit bureaus such as TransUnion or Equifax take into consideration the balance to limit ratio in order to determine your overall credit score. This utilization ratio is actually the proportion of your credit limit and the amount that you spend using your credit card. Keeping this ratio monitored is important because it shows how well you manage the credit that is available for you. In case you don’t want to give an impression of yourself as a credit-hungry person, try limiting your credit utilization ratio by thirty to forty percent of your total credit limit.
- Try Paying Your Required Monthly Payment Every Month: Each month lenders report your credit-related data to the credit bureaus. After this process is done, the credit bureaus then prepare your credit report and calculate your overall score. A delay or miss in making the monthly payment can cause serious harm to your overall credit score. Making all your monthly payments on time will help you in building a healthy credit score.
Apart from all these methods, another perfect alternative to build credit fast is by making use of your monthly home rentals and utility bills. We at Credit Rent Boost, work very closely with both tenants and homeowners and report their monthly rent payments to the credit bureaus. In case you wish to know more about us, don’t forget to have a glance at our website.