Top 5 means to build credit:
You can have an excellent credit score if you follow these best ways to build your credit.
- Becoming an authorized user.
- Getting a secured credit card.
- Applying for a secured loan or credit-builder loan.
- Look for a creditworthy cosigner.
- Getting credit to pay your rent.
Becoming an authorized user:
It would be best to have a creditworthy family member who can add you on his account if you are on a bad or zero credit.
You will become an authorized user if a creditworthy friend or family member can add you in his established account. When you become an authorized user, that account will be responsible for reporting your credit, and you don’t have to pay the charges.
When one of your creditworthy family members or friends decides to add you in their account as an authorized user, it is good to inform the credit bureaus as well. The best thing is you should plan the strategy with the account holder so that you both have the idea when, how, and for what you can use the credit card.
Let’s take an example. Parents have the option to add their children to the account as authorized users so that they can start to build their credit. But they can put some conditions such as they can only use the credit card in emergencies. But if they do, they have to pay back the credit card debt.
Getting a secured credit card:
This option is the best if you have zero credit and no one that can add you in their account as an authorized user.
You can apply for a secured credit card which can help you build your credit score in those cases when you are on zero or poor credit. The working of a secured credit card is the same as unsecured credit, but the difference is that you have to support it with upfront credit. There are a lot of well-known banks and companies that are offering secured credit cards.
A secured credit card works like a normal card. You can make purchases even against your limit and pay it back full each month with interest charges. When you close your account, the cash you have deposited will be yours because it is like security. Or else, you can continue making purchases and keep using the account.
It is also seen that some of the secured credit cards tend to have more interest rates as compared to their unsecured counterpart. So, you should pay your complete balance each month.
Applying for a secured loan or credit-builder loan:
You can go with this option if you are completely bankrupt and want to start over fresh to improve your credit score.
Secured Personal Loans or credit-builder loans are very helpful when you want to rebuild your credit score and pay off the loan by storing money in your account. The credit bureaus must be informed about these loan options as a personal loan even if you don’t have access to the money yet.
You cannot access that money until the loan is fully paid with complete interest. Once you clear your debt, it will be transferred to your savings account and will be yours. In simple words, it is like layaway, and you have to pay for the money instead of things. Your credit score will be improved as well.
There are several major banks and credit unions that are offering secured credit loans and keeping the money in your bank as a security. But the amount of loans approved by the banks and companies is often less, which is up to $1,000. You can always apply for a credit online at personalandpaydayloansonline.com 24/7.
Look for a creditworthy cosigner:
In this method, you should have a trustworthy family member or friend who has excellent credit and also help you with the loan as a cosigner.
If you are unable to get a secured personal loan or secured credit card, you can ask your cosigner to help by borrowing money on his behalf. In simple words, when you apply for a loan or credit card, a friend or a family member will sign with you as well.
Having a cosigner with an excellent credit score will not only help you in qualifying for the loan but also having lower interest rates as compared to the rate of interest applied on personal loans. You should also keep in mind that this is not like adding someone in the credit account as an authorized user. If you are unable to pay the debt, not only you are responsible, but your cosigner as well, and it will also affect his credit score.
Getting credit to pay your rent:
This option is the easiest and simplest among all of them. You can apply for credit to pay your bills and loans that affect your credit history. There will be a small amount of fees as well.
There are a few credit bureaus that take the rent payments into their credit report considerations, but most of them don’t. What you have to do is to find a service that can report your monthly rent payments to the credit bureaus. You can consider taking the services of Rental Kharma and RentTrack.
The drawback of hiring these services is that they are going to charge you monthly or upfront fees, and the payments must be verified by your landlord. But if you still want to hire these services to rebuild your credit score, you should check the rates of different companies by keeping your budget in mind.
Check & Balance on Your Credit Report:
If you want to maintain the credit that you have built, you need to keep an eye on your credit score continuously. You can also visit AnnualCreditReport.com to get your free annual credit report copy.
If you feel that the debt is too much and you can’t maintain your credit, you should consider a debt consolidation loan. This offer will help in situations like student loan debt, high-interest credit card debt, car loans, or other types of loans with lower interest rates than your current loan.