Many institutions use your credit score to determine how reliable you are in order to help them decide whether to give you a loan, how much to loan you, and what interest rate to charge you. Without a credit score, it’s very hard to buy a car, shop for a house, or even get a credit card.
If you have a very low credit score, or no credit score at all, it can be easier than you think to build it up to something better. At Cash Factory USA, our experts know the easiest path to getting a great credit score. Ready to learn how to increase your credit score? Explore our blog today for all the details.
1. Become an Authorized User
The first step you can take towards a great credit score is becoming an authorized user on someone else’s card. Approach a close family member or your significant other and ask them to add you as an authorized user. You don’t have to have access to the card or use it for this method to help build your credit history and score. The history and transactions from the primary cardholder will appear on your account as yours.
The best person to talk to will be one that has a long history with the card and has made all their payments on time. Choosing to be an authorized user on an account that has a ton of debt and late payments will not help you develop a great credit score so be careful who you decide to ask.
2. Get a Secured Credit Card
As someone who doesn’t have a credit score, it may be impossible to get a regular credit card, but you can still get a secured card. These are cards that are backed by a cash deposit that you have to make upfront. The cash deposit also generally serves as your credit limit. You use this card like you would any other, but instead of paying off the balance at the end of the month, you add more money that you can use at the beginning of the month.
This is a great temporary solution that will allow you to build your credit score and still have access to a credit card. When your credit has improved enough, you can start looking for a traditional credit card.
3. Take Out a Secured Loan
A secured loan, or credit-builder loan, is a loan based on the same principle as a secured credit card. You specify a loan amount with a lender and then make payments before receiving the amount. Once the loan is repaid, you have access to the money. This type of loan acts like a sort of forced savings account that gives you access to a large lump sum and helps you build a great credit score.
4. Use A Cosigner
Whether you need a loan or not, taking one out with a cosigner is a great way to access money and build up a great credit score. Your cosigner needs to have a long credit history and a good score because if you default, they’re responsible for paying back the money. It’s also important to note that any late payments or defaults will appear on both credit histories and may damage your cosigner’s credit score.
5. Bills Build Credit
You can report any regular bills that you pay on your own to be added to your credit history. Contact a rent reporting service and have them add rent, gas, electricity, and other regular bills to your credit report — you can even include your phone bill. In this way, you can improve your credit score without having to open up a credit card or take out a loan.
Create a great score by paying your bills on time and in full. Over time, you create a great credit score that proves you’re reliable enough for a loan.
6. Pay Your Bills On Time
Learning how to increase your credit score won’t do you any good if you don’t follow best practices to maintain it. Paying your bills on time is one of the most crucial aspects of ensuring your great credit score stays great. You want to aim for paying 100% of your bills on time. Any bill that goes to collections may end up on your credit report and severely damage your score for at least 10 years.
7. Don’t Build Debt
Avoiding debt is a good rule to follow whether it’s for your credit score or not. Using too much of your credit card balance and then paying the minimum amount guarantees that you’ll end up owing much more than you originally used due to extremely high interest rates. As you build your debt, you look like a less reliable candidate for new credit cards and loans. Eventually, you may not be able to keep up with your payments and you might even end up filing for bankruptcy. A bankruptcy can stay on your credit history for up to a decade.
8. Keep Old Accounts Open
The last tip we have for building a great credit score is to keep all of your old accounts open — even if you don’t use them. One of the metrics credit reporting agencies use to decide your score is the age of your credit history. The older your account history, the better your credit score will be.
Now that you’ve learned the best strategies of how to increase your credit score, you can get started building a responsible financial history. If you’re looking for more advice, make sure to explore the rest of the Cash Factory USA blog today.