Your credit score holds the key to some of life’s biggest financial decisions and opportunities. Those who borrow money, use it responsibly and make their payments on time can enjoy greater borrowing opportunities, and that’s why you should always know your credit score to know where you stand. But if you have no credit profile or if your credit has been badly damaged, you still can build it through borrowing money. It just might take a few extra steps on your part.
Here are some ways to get started:
-Be an authorized user on someone else’s credit card. It’s important to check with the credit card company to make sure the account activity gets reported under your name.
-Get a cosigner on a personal loan. Lenders are more willing to do business with someone lacking a good credit history if the individual has a cosigner with good credit. The catch is that if you fail to make the payments, the fallout will not only negatively affect your credit score but your cosigner’s score.
-Apply for bad credit personal loans through qualified lenders. These options typically don’t require a cosigner and allow for borrowers to repay the loans at their own pace.
-Open a secured credit card or take out a credit building loan if possible. With a secured credit card, you usually don’t need to have good credit or even any credit history because the lender will be protected from default by a cash deposit you make on the card.
Why low credit utilization is important:
-Your credit utilization is the percentage of the balance you carry on your credit card against the credit limit you have. Understanding credit utilization is important because if you’re constantly running your credit utilization high, you will lower your credit score. That’s because it can signal to the credit bureaus that you might be taking on more debt than you can handle, and if that’s the case, they will penalize you.
-Also, credit card issuers may report to the credit bureaus before your due date, so even if you pay your balance off completely, they may not have it recorded on your latest score. The best suggestion for keeping your credit utilization low on your credit card is making two monthly payments, or possibly asking your credit card issuer for a raise on your limit. A raise will lower your credit utilization.
Don’t pay late:
-You never want to make late payments on loans and credit card bills. The consequences of late debt repayment go beyond just hurting your credit score. Late payment habits can result in late fees and a lot more interest added to your outstanding balance. Too many missed payments may even trigger a default which could result in your account being closed and hurt your credit score even more. Defaults on credit cards and other bills could also have you dealing with collections agencies. Paying on time all the time will bump up your credit.
The key to good credit is to borrow money and pay it back responsibly, and the key to borrowing money and responsibly paying it back is to have good credit. In order to break into this cycle, those lacking a credit history or in possession of a poor one can try a few tricks. It won’t happen overnight, but attaining and maintaining good credit is certainly possible for those willing to give it a serious try.