Building credit is important for financial success. Without good credit, it is not possible to get approved for loans or to get lower interest on loans. People with good credit are also likely to pay low premiums for insurance and find it easy to get approved for rental apartments and utilities.
But to build credit, you have to apply for and get some credit first. You will have to build a good credit history over the years. It is also important to start as early as you can after your college or as you begin your professional life.
Here’s a beginner’s guide to build credit.
Secured Credit Cards
The quickest way to build credit is to apply for at least one secured credit card and begin using it judiciously. Secured credit cards require security deposits on the applicants’ part. The deposit acts as the collateral for your usage of the card. The amount is refunded if you are upgraded to receive an unsecured card or if you close the account.
Without any credit, it is difficult to get approved for unsecured credit cards. But secured cards are protected due to the collateral. Once you have a credit card to use, you can start building good credit via it.
Applying for a credit card also shows up on credit reports. Each new inquiry related to your finances shows up on credit reports. Your positive credit history will also impact your credit score positively. It will also help you receive an upgrade on the secured card.
Timely Payments
Timely payment of credit card bills is a big factor that affects your credit score. Delayed or skipped payments can lower your score. As you continue to show to the creditors that you are a responsible borrower with your ability to make timely payments, it will improve your chances of getting approved for loans and other credit cards.
It is also important to pay utility bills on time. Things like insurance premiums and cell phone bills are also other important payments. Timely payments on these bills don’t impact the credit score. But if you miss these payments or if your account is closed due to non-payments then it can show up on your credit reports. Unpaid bills are sent to collection agencies. Once a bill reaches the collection agencies, it is likely to show up on the credit reports and lower your score.
Authorized User on Credit Cards
Becoming an authorized user on another person’s credit card is also the quickest way to build credit. If the credit card in question has good payment history and doesn’t carry a large or high balance then it may be helpful for you.
Becoming an authorized user on another’s credit card means that the card’s credit history will begin to show up on your credit reports too. So, you have to choose a card with extremely good payment history. There shouldn’t be any missed or delayed payments on the card. You should also trust that the owner of the card will continue to make timely payments on it. So, choose the primary account holder with due consideration.
There are other things to keep in mind when choosing a credit card for this use. The card issuer must report to the credit bureaus. Credit card activities are generally reported to the credit bureaus. But it is still better to ensure this for a fact.
If you can’t find a friend or family member as the primary card holder in good standing then you can also reach out to credit repair companies near me that deal in rebuilding credit cards. In fact, this is always the better option instead of asking someone in your circle. Credit repair companies ensure that the rebuilding credit cards available with them are in good standing. You won’t have to even worry about the primary user defaulting on the payments and risk lowering your credit score. Becoming an authorized user means you only get to benefit from the credit history of the card. You are not authorized to use the card in any way. You are also not responsible to make any payments on it.
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