How to build credit
We all need cash for our livelihood and fulfil our needs. And, almost all of us use credit to buy things. We depend on credit for each and everything.
Use of credit has become normal and everyone is using the credit. Even if we want to buy a cell phone, we need to open cell phone account that can only be done by the credit.
But sometimes we face problems due to our low credit score.
Most of the people use credit to buy home. And, low credit score creates a problem in doing so.
Credit scores are nothing but the numerical value or we can say, score that shows your credit history. And, for qualifying the loan, there must be a fix credit score.
These credit scores are generally seen by lenders when you buy a home. If your credit score is below or average, then you may have to pay high rate of interest or you may not get good loan terms.
So if you want good loan terms, then you really need to raise the range of your score from average to GOOD. Or before the good credit, one must have a credit.
If you don’t have credit then you have to pay cash for everything, or even it may cause a problem for buying a home.
In some colleges you may need good credit history for education loan or at some places you may get a job through your good credit history.
In short, as long as you don’t have credit, you are not able to get approval for home, cell phone, car, loan etc.
So, firstly you need to build your credit.
If you are not well aware of it, then some information is given below that may help you on how to build credit. You may find it helpful.
Build credit and get good scores as well.
Procedure To Build Credit:
When a person borrows money, then the lender keeps all the information of his payment. How does the person manage his payments?
We will tell you!
The lender, then, reports all this information to the one or all the three credit bureaus of US:
• Trans Union
These above three credit bureaus keep all the information of one’s credit report. This information helps lenders for deciding whether you are able to lend or not.
If you think not to use your credit will not affect your credit report, then you are wrong as you must have to use your credit for building good credit score and history.
Also your credit report should be good if you want to take further profit of credit. You will always face trouble due to low credit score.
So, timely payment is a must.
These credit scores use specific proportion for calculating credit score. One can easily check his credit score on several free credit score websites.
Various means to build credit:
You can build credit through various means:
- Credit builder loan: credit builder loan helps people to build the credit. For this, when you borrow money from lender, the lender held money until the loan is repaid by you. It’s a kind of saving and the report of your payment is given to the bureaus. Credit union and community banks offer this type of loan.
- Secured credit cards: You can also build your credit by using secured credit cards. You can not use these secured cards forever. These cards are generally meant to help in building an unsecured card. You can use these secured cards same as that of other credit cards. You have to make timely payments. And you are charged with the interest if timely payment is not done by you.
- Student credit cards: student credit card is also a way to build credit. This student card is generally meant for the young people who need to build credit for their future requirements. But the criteria for student credit card are slightly different as that of usual credit cards. And, you should know the criteria.
- Store cards: store cards are same as that of other cards. You can use these cards for purchasing things. These cards are issued by some issuing stores ,so these cards can only be used at those issuing stores. You need to buy things from these issuing stores only.
- Student loans: Student loan is given to the students for educational purposes. And, the information of their timely payment is reported to the student credit report.
- Rent: Your rent payment report is listed in the credit score through the rent reporting service. Not all credit score reported this type of payments. But, some of them reported this payment in the credit score that may help them to build credit.
- Find a co-signer: You can also find a co-signer to build credit. You can use their credit card to build credit. They can be your co-signer to build credit. And, you really need to do timely payment otherwise it will also affect the credit score of your co- signer.
- Access on unauthorised card: you can use someone’s card as an unauthorised user. For this, you can use any of your friend’s or family member’s cards. You can access to this card and can build credit history.
With this, you can create good credit history, but yes, you need to report this unauthorised access to the credit bureaus so that they will help you in building authorised credit. In unauthorised access, you are not bound to pay but if the primary card user wants you to pay then you must do so.
Always try to make good credit score:
It is mandatory to have good credit score as it helps you a lot to build credit. So, always try to raise the credit score by making some good habits.
- Make timely payments. DO NOT delay any payment such as Utility bills, rent payments etc. This will affect your credit score.
- Keep the credit use low. DO carry balance in credit but make sure it will not exceed 30% of the limit of your credit.
- DON’T try to open much accounts. Always avoid opening new and many accounts. It will lower the credit score as there is an account age which lowers down due to the new accounts.
- DO check your credit history for any fraudulent or errors.
- Keep your account active. It will build good credit score and history.
At the end, it is “us” who are going to build credit and good credit scores, so that it becomes easy for us to deal with any business venture or livelihood.