Building good credit is a necessity if you want to avail of loans and credit. It can create quite a problem, though, for young adults and others who are making a start. How do you build it when you don’t have any credit history? For many people, getting access to ready funds is an immediate necessity. It may not be possible for them to wait for several years to establish their credit history and then take it from there. They need to find the quickest way to build credit.
Fortunately, if you happen to be in such a situation, there are solutions that will allow you to build credit more quickly. Here are three quick steps that you can use for building credit:
1. Get a secured credit card
If you use them judiciously, credit cards are a great way of building your credit. However, you do need to have some credit history to qualify for an unsecured credit card. Don’t fret if you don’t have one, though. You can consider getting a secured credit card for the time being.
These cards come with a specific amount of credit, and you must make a deposit for that amount. You can then use the card to make purchases up to the offered limit and make monthly payments that will help to build your credit score. After you build up enough to get a regular credit card and decide to close the secured credit account, you will get your deposit back.
2. Become an authorized user on an existing credit card account
One of the quickest ways to build credit is to become an authorized user on an existing credit card account. You don’t need to get a credit card, you only need to appear as a user on one. If your parents, relatives, or friends are willing to help, they can add you to their credit card account. Once that happens, their credit history will appear as yours on your credit report.
And if they have been making timely payments and have a credit file that is in good standing with the three bureaus, you will see an improvement in your credit score as well. Keep in mind, though, that if the account has a history of making late payments and of maxing out the credit limit, they are more likely to have a low credit score, and that will reflect negatively on you as well. So, it’s essential to only ask for credit building assistance from financially responsible people.
3. Avail of a credit builder loan
Getting a credit builder loan can benefit you and boost your credit score, but your bank will only lend you one if you are financially secure. You should have a regular income, a savings or checking account with the bank, and no overdrafts. There are different types of credit builder loans. The bank could offer you a secured loan on the condition that you must maintain an equal amount in your savings account until you have repaid the loan in full.
The bank could also put the loan amount into your savings account and allow you access to the funds only after you have repaid the amount with interest in one or two years.
If the bank thinks you are fiscally responsible, it could make you an unsecured credit builder loan. In these types of loans, you won’t need to put up any collateral. The bank won’t put any restrictions on your use of the loan amount, either. However, as with the other types of loans, it will report your payments to the three credit bureaus—Experian, Equifax, and TransUnion. So, you need to get into the habit of making timely loan payments. It will not only build your credit, but it will also make a positive difference in your credit score. With a high credit score that is in good standing with the three credit bureaus, future lenders will find you creditworthy. As someone who can be relied upon to manage their finances well and repay all outstanding payments in a timely fashion, you will face no trouble in securing home mortgages, car loans, personal loans, educational loans, and other types of loans.
Leave a Reply