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Top Ways to Build Your Credit

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Advance Personal Finance

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What are some tips for building your credit?

Everyone wants to have a good credit history.  This allows them to qualify for a loan from any lender in the case of financial emergencies or the purchase of large ticket items. Building your credit is not an easy task and demands a lot of financial discipline. Bad credit can deny you a lot of things when it comes to accessing loans. Credit history is one of the main determinants of whether you will get a loan or not from your lender. It takes time to build your credit, but there are a few tips that can help you along the way.

 Acquire a Secured Credit Card

If you are building credit from the scratch, one of the best ways is to start with a secured credit card. A secured card requires a cash collateral deposit that becomes the credit line for that account. For example, if you put $500 in the account, you can charge up to $500.  Make sure you apply for a secured card that has low annual payment and that reports to all credit bureaus.

Get a Credit Builder Loan

A credit-builder loan holds the amount borrowed in a bank account while you make payments, building credit. When the loan is paid off, the money is released to you.  Credit-builder loans do not require good credit for approval. They do require that you have enough income to make payments. The amount you borrow is held in a bank account while you make payments. Your on-time payments are reported to the three major credit bureaus, Equifax, Experian and TransUnion. Because credit scores are calculated from information in your credit reports, those on-time payments can have a big impact.

Apply for Rent Credit

Another way to build your credit is applying for a rent loan.  During the lease period you and the owner of the property are in a landlord tenant relationship. A Rent Credit is not actual money at the time you pay rent, you should think of it as money that is either applied to the purchase price (option price) when you exercise your option (buy the property).  You get good ratings due to the on-time payment but make sure the reports are given to the credit bureaus.

Build your score with good habits

Practice these good credit habits to build your score and show that you’re creditworthy:

  • Make 100% of your payments on time, not only with credit accounts but also with other accounts, such as utility bills. Bills that go unpaid may be sold to a collection agency, which will seriously hurt your credit.
  • Keep your credit utilization low — utilization is your balance when compared to your limit. We recommend paying in full each month, but if do you carry a balance don’t let it exceed 30% of your credit limit.
  • Avoid opening too many new accounts at once; new accounts lower your average account age, which makes up part of your credit score.
  • Keep accounts open for as long as possible. Unless one of your unused cards has an annual fee, you should keep them all open and active for the sake of your length of payment history and credit utilization.
  • Check each of your credit reports annually for errors and discrepancies.


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