Many institutions use your credit score to determine how reliable you are as a borrower. Your credit score helps institutions decide on factors such as whether to give you a loan or not, how much to loan you, and what interest rate to charge you. Without a credit score, it can be very hard to finance major purchases like a car or house. Having no credit history can even prevent you from getting a credit card, altogether. The good news is that 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. Ready to learn how to improve your credit score? Keep reading for all the details.
How to Improve Your Credit Score
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. Consider approaching someone you trust, such as 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 even use it 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 ask is someone with a long card history who has made all their payments on time. Becoming an authorized user on an account with a ton of debt and late payments won’t help you develop a great credit score. So, be careful who you decide to ask.
2. Get a Secured Credit Card
If you don’t have a credit score, it may be impossible to get a regular credit card. Fortunately, you can still get a secured credit 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 a secured 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 can help you 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 forced savings account. It gives you access to a large lump sum and also helps you build your credit.
4. Use A Cosigner
Whether you need a loan or not, taking one out with a cosigner is a great way to build up your credit. Your cosigner should have a long credit history and a good score. If you default, they’ll be the one responsible for paying back the money. Keep in mind, any late payments or defaults will appear on both credit histories and could also damage your cosigner’s credit score.
5. Bills Build Credit
You can request that any regular bills you pay on your own be reported on your credit history. Contact a rent reporting service and have them add bills such as your rent, gas, electricity, and other regular bills to your credit report. You can also include your phone bill. Using this method, you can improve your credit score without having to open up a credit card or take out a loan.
Improve your credit score by paying your bills on time and in full. Over time, you can establish a great credit score that can prove 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 work to maintain it. Paying your bills on time is one of the most crucial aspects of keeping your great credit score. We recommend trying to pay 100% of your bills on time. Any bill that goes to collections may end up on your credit report and could 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 start building a responsible financial history. If you’re looking for more tips, make sure to explore the rest of the Cash Factory USA blog.
High-interest loans can be expensive and should be used only for short-term financial needs, not long-term solutions. Customers with credit difficulties should seek credit counseling. The opinions expressed above are solely the author’s views and may or may not reflect the opinions and beliefs of the website or its affiliates. Cash Factory USA does not provide financial advice.
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