7 Ways To Build Credit From Scratch
Whether you want to sign a lease, buy a car, or borrow money for any alternative reason, your credit score is imperative in doing so. It is a focal point of your financial reliability, and stays with you throughout your lifetime. Because of this, it is vital to maintain good credit so you can save money in the long-run. Below are a few suggestions for how you can build credit when you don’t have any.
1. Pay Your Bills on Time
When it comes to paying your bills, proving that you can meet a deadline is a top priority. What having good credit comes down to is confirming that you are responsible with money, and understand the importance of paying off your debt at the time it is due. Be sure that above all else, you are making your payments on their due date.
2. Stay Organized
Keeping track of important dates and deadlines is a very easy and equally vital aspect of maintaining good credit, because so much of your score goes into proving that you can pay your bills on time. Keep a calendar or a planner if you don’t already and record each and every time a payment is due and when a payment is made.If you are tech savvy, you can put reminders on your phone, or better yet, you can arrange for automatic bill-pay. This is when you set up your bank to automatically send payments to the credit cards and vendors you owe money to on their due dates. If you have a hard time remembering to make your payments, this is a great way to get around that problem.
3. Apply for a Credit Card
One of the best ways to build credit when you don’t have any is to apply for a credit card or secured credit card. Once you are approved, utilize your credit card for routine purchases such as gas and groceries. Make sure to make your minimum payments on-time, every time. Having a number of late payments on your credit report is a sure way to hurt your score right out of the gate. Launch CU offers an excellent credit card with a low-introductory rate, which is perfect for those looking to start building credit.
4. Apply For A Small Personal Loan
A personal loan is another excellent tool you can utilize to start building your credit portfolio. Personal loans are perfect for the consumer who wishes to stay away from credit cards. A savings secured loan is an excellent option for someone who is looking to build credit from scratch. When utilizing a savings secured loan, you are essentially borrowing against the money you have in your savings. Instead of using the funds you have available in your savings account to make purchases, you are borrowing against those funds while your money stays in your account. Thus, utilizing a savings secured loan will not require you to tap into your emergency fund, or miss out on future dividends. Launch CU offers a savings secured loan that will allow you to borrow up to 100% of your savings account balance. Apply online today for yours!
5. Reduce the Number Of Credit Cards You Apply For
In the world of credit, charging fifty dollars to one card and fifty dollars to another is considered worse than charging one hundred dollars on one card. This is because your credit factors in the amount of cards in your possession that have balances on them. In addition, opening multiple credit lines at the same time can lower your credit history, as well as lower your credit score if it has to be ran every time you apply. As a rule of thumb for establishing good credit, pay them off as soon as possible.
6. Pay Attention To Your Card Payments
You should always be aware of what you owe on your credit cards, the smaller the number and the faster you pay that amount off, the better. A multitude of small, completed payments are more preferred by credit agencies than less frequent, large completed payments.
7. Become An Authorized User
One way to start building credit without taking out a loan is to become an authorized user on a friend or family member’s credit card. An Authorized user means you have someone else’s card in your name. This does not make you the primary owner, however you can still make purchases with it. We recommend finding a trustworthy family member whom you can depend on to make his or her payments on time. If they fail to do so, your credit will also be lowered. Essentially, anything good or bad the owner of the credit card does will affect the authorized user.
Final Thoughts on How to Build Credit
Having good credit is a significant part of adulthood, and it is suggested that you sign up for a credit card sooner rather than later so you can build a substantial score early. Use it like you would a check, only buy what you can immediately pay off from your checking account.
Follow these tips, and you will be well on your way to receiving approval for future purchases and loans!