Many institutions use your credit score to determine how reliable you are as a borrower. Your credit score may help 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. With a bad credit score, it may be very hard to finance major purchases like a car or house. And 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 may be easier than you think to build it up. Ready to learn some tips 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 improving your 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 may be 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 may not help you improve your 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. But 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 Can 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. 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 to Improve Your Credit Score
Learning how to increase your credit score won’t do you any good if you don’t work to maintain it. And paying your bills on time is one of the most crucial aspects of keeping your great credit score. This is because lenders want to see that you’re responsible with your debts, and that they can trust that the money they lend you will be paid back. Even one late payment can negatively affect your score. So, making on-time payments consistently is essential.
It’s recommended that you try 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 several years. To make sure you never forget to pay a bill or miss a due date, set up automatic payments or reminders.
In worst case scenario, if you do miss a payment, try to make it as soon as you can. Depending on the creditor and type of debt, late payments are typically reported after 30 days. So if you can catch up quickly, this could minimize the damage.
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 almost 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 some people might even end up filing for bankruptcy. And bankruptcy can stay on your credit history for up to a decade. So, do your best to keep your debt to a minimum.
8. Keep Old Accounts Open to Improve Your Credit Score
The last tip for improving your credit score is to keep all of your old accounts open, even if you don’t use them. Your credit history length can make up 15% of your credit score. So, closing old credit card accounts can shorten your credit history, which may lower your score. Even if you no longer use an old account, keeping it open may help improve your credit age. The older your account history, the better your credit score may be.
Improving your credit score is a long-term commitment. But by following these steps and staying proactive about your credit health, you’ll be well on your way to improving your credit score. 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.
* This blog contains links to other third-party websites that are not endorsed by, directly affiliated with, or sponsored by Cash Factory USA. Such links are only for the convenience of the reader, user, or browser.