5 Ways to Build an Exceptional Credit History
5 ways to build an exceptional credit history
Here are some things you can follow to achieve the goal of building credit.
1. Access credit
It’s not easy to get approved for a credit account without a credit history, but it’s not impossible. Here are some options to consider:
Student credit cards: If you’re a college student, a student credit card is a great way to start building credit.
These cards are unsecured, which means you do not need a security deposit to be approved. Also, some offer rewards every time you use the card.
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Secure credit cards: If you’re not a college student or can’t get approved for a student credit card, a secured credit card is a good alternative.
The main drawback of these credit cards is that, to be approved, they require a security deposit that is usually the same amount as the credit limit.
In everything else they work in the same way as conventional credit cards.
Being an Authorized User: If you’re looking to build credit quickly or don’t want a credit card of your own, consider asking a trusted family member to add you as an authorized user on one of their credit cards.
As an authorized user, you will get a card attached to your account and all account history will be added to your credit report. However, you will not be legally responsible for making payments.
This is only a good idea if your family member has a perfect payment history on the account and keeps their balance relatively low.
Credit Build Loan: If you want to avoid credit cards altogether, some companies offer what’s called a credit build loan to help establish a credit history.
The difference between this type of loan and, for example, a personal or car loan, is that you do not get any money when the loan is approved.
Instead, the company will place the loan funds in a savings account or certificate of deposit. Once you have finished making the interest payments, you will receive the loan amount.
It’s important to note that your rent and utility payments usually don’t help you improve your credit.
However, if you stop doing them, your landlord or utility company could send your account to collections, which will hurt your credit score.
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2. Make payments on time
Anytime you get a credit card or credit loan to build, it’s important that you make timely payments every month.
To make things easier, consider setting up automatic payments to come out of your checking account. Thus, you do not need to remember to make payments every month.
The only thing you will have to make sure is to always have enough cash in your checking account to avoid an invalid payment.
And if you have a credit card, make sure you pay your balance in full each month before the due date. instead of just meeting the minimum payment.
In this way, you can generate credit without having to pay interest.
3. Keep balances low on your credit cards
If you decide to get a credit card, try to use it responsibly and sparingly at first.
You’ll usually have a low credit limit, possibly a few hundred dollars, so you’ll want to keep your credit utilization ratio reasonable.
However, over time, you can request an increase in your line of credit or get approved for a credit card that offers a higher limit.
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4. Access your credit scores
As you build your credit, it’s crucial to know where you stand. If you have a credit card, the company that issued the card may offer you free access to your FICO credit score.
You can also get access from Discover Credit Scorecard .
You can also access your VantageScore through free sites like Credit Karma and Credit Sesame .
Once you have access, you can periodically track your score. These services also often show you if something is hurting your score and how to deal with it.
Also note that these credit monitoring services may not have a score on file for you. However, once you’ve used the credit for a few months, check back.
5. Be patient
There is no way to establish an exceptional credit history overnight.
Even if you get a few different credit accounts to start building credit, it will take time to develop the right behaviors and demonstrate that you’re a consistent, responsible credit user.
As you follow these steps, you’ll begin to build a good credit history and set yourself up for lower interest rates and better opportunities for your dream home, apartment, or job in the future.