If you are new to finance, it can seem intimidating to learn how to build credit. It can feel as though you are stuck without a credit account. Lenders will be more inclined to refuse your application if you have no credit. Good news is that you can begin building credit as early as 18 years old! Follow these tips to get the best interest rate.
On-time payment of your bills
A list of all your accounts is a great way to build credit and pay bills on time. Be sure to list the lender, minimum monthly payments, and the balance owing. Next, you can divide the list into categories based on whether you pay automatically and manually. If possible, modify the due date or use an electronic payment system. You can also specify an amount that you want to be debited automatically.
Your credit score will be affected by your payment history. More than thirty percent of your credit score depends on it. So make sure to pay your bills on-time. A late payment could result in a penalty or even a negative record on your credit report. Credit reports will likely include information about your credit cards, loans, and sometimes utility and mobile phone accounts. Paying all of your bills on time can go a long way toward building your credit score.
Multiple credit cards
Although multiple credit cards might sound like a great idea it can also cause financial problems. Multiple cards may make you feel more comfortable spending, but this can lead to significant debt and financial problems. You should avoid using multiple cards for rewards. Instead, stick with one. A single card will give you the best results. Next, make sure to pay it off as soon and as quickly as you can. This will allow you to keep track of your payments, and prevent overspending.
Although having multiple credit cards can improve your credit score, too many credit cards can cause credit card debt. It's best to choose only the cards you can use responsibly and make minimum payments each month. Multiple credit cards will increase your credit utilization. You should use them carefully. It is generally best to keep two or three credit card accounts with the right credit mix. Your credit score will be better if your payments are tracked.
You can increase your credit limit
A good time to request an increase of your credit limit is after you have graduated from college, or if you have a steady income. An increase in your credit limit can make it easier for you to make smaller purchases. This will allow you to increase your spending power. A request for an increase is simpler than applying to a new card. You may request an additional pay increase if your salary has increased or you have just moved to a higher paying job.
Once you have established good payments records with your cards you can call your credit card issuer to request an increase. While you are waiting, explain why you need a greater credit limit. Tell your credit card company if you have recently had a salary increase. Also, mention your outstanding payment history. A high credit limit makes you more desirable to creditors. But, increasing your credit limit for building credit doesn't mean that you can get a credit card with no interest or fees.
Get a credit-builder loan
A credit builder credit loan is a great way for you to build good credit and raise your credit score. These types of loans deposit funds into your account and require monthly payments towards the payoff. Your credit score will rise if you make timely payments to the three major credit agencies. However, late payments will affect your credit score. Make sure that you have the funds to pay the monthly bills. Credit builders loans can be obtained at your bank, credit union, online lender, or other financial institution.
Although a credit builder loan doesn't require a formal credit check (although some lenders may use your ChexSystems banking history to determine your eligibility), it is not necessary for you to have a credit check. You may not be approved for a loan if your check bounces. Credit unions often offer these loans but you need to join to be eligible. A membership fee of just a few dollars is required, as well as a donation to the partner charity.