How To Build Your Credit Score

A better credit score makes for a greater choice of financial options. So, how do you improve yours? These tips will help you do so. 

1. Get A Secured Loan Or Credit-Builder Loan

A credit-builder loan is designed to help one to build his/her credit up.  Unlike most loans, the borrowed amount isn’t released to your account for use but is instead held by the lender until you have repaid it fully. Your payments, however, reflect or are reported to credit bureaus giving your credit a boost. Community banks and credit unions commonly offer this type of loan. 

You can also use a secured loan to build your credit rating. However, this option is available for bank account owners that can use money already in their account as collateral. Interest rates on secured loans is, however, much higher than the interest the savings earn, but significantly lower than with many other loan options. Paying the loan back helps reflect on your financial activity, thus better rating. 

2. Consider A Co-Signer Loan

This option involves getting an unsecured credit card or loan via a co-signer. The co-signer, however, needs to understand that they have to pay the full loan amount should you fail to pay.  This is one reason both you and the co-signer need to understand the terms before agreeing on the loan terms. 

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3. Be An Authorized User

You could ask a family member, spouse, or even a friend to add you as an authorized user on their card. In so doing, their long/positive credit history starts to show on your credit files as well. This helps reduce the amount of time it would take to generate a positive score. Many people might not know about this because you, the authorized user, don’t have to possess the card physically or even use it to enjoy the benefits. 

This method is, however, only applicable to issuers that report authorized user activity to credit reference companies.  In addition to this, you’ll want to discuss how the card is to be used to the owner beforehand, to avoid conflicts. 

4. Get Credit For Your Bills

Most of the bills on your name can be used to help build your credit rating. These include rent, cell phone, and utility bills, among many others. Some rent-reporting services, e.g., LevelCredit and Rental Kharma do report or add the rent paid on your credit report. It would help if you also were sure your landlord or property manager does support this to be able to take advantage of the service. Some firms do not, however, report such payments to credit bureaus. 

Cell phone and utility bills can also help give your credit rating a boost. Some companies such as Experian Boost do offer this service, whereby these bills will reflect on your credit report.  You, however, need to register with Experian for this strategy to work. 

5. Get To Know Your Credit Score

Make it a habit of checking your credit report and score regularly. Most bureaus will update the info after every other week. It would thus be advisable to keep up with whatever changes your credit report has, and try to keep it as clean as possible.

6. Practice Good Credit Habits

It takes time and effort to build a good credit score. You need to have at least one active account (more than 6 months old) and a creditor that reports to credit bureaus to build your rating. You can thus keep track of your FICO score or Vantage score this way. These are some of the best companies for reporting and keeping track of your credit rating.  Here are some of the ways you can maintain/build a healthy credit rating: 

a. Make timely payments:  Make a habit of paying all your bills and credit accounts on time.  Any unpaid bills may be reported to a debt collection agency, which could hurt your credit score. Making timely payments can help avoid this.

b. Keep your credit utilization low:   It would be advisable to keep your credit utilization to 30 percent or even less. This will make it much easier to manage all your debts. 

c. Don’t apply for several credit accounts simultaneously:  Applying for a credit account can put a temporary dent on your credit score. The dent will, however, be much more significant if multiple applications are made within a short period of time. You might thus want to space your applications to 2 applications in a year or take a look at guaranteed payday loans.

d. Don’t close all credit card accounts: As pressing as it might seem, closing all your credit card accounts isn’t a wise move, especially if looking to build your credit. You might want to keep one credit card account open (the oldest) when/if you choose to close other accounts to avoid hurting your credit utilization score. 

7. Check your credit reports and scores

Keeping an eye on your credit score, and especially watching out for errors on your credit report can also help boost your overall rating. By monitoring your report, you’ll be able to catch any mistakes there might be on your account. Be sure to contact the credit company if there’s an error with your credit report. 

There are plenty of tools that you can use to monitor your credit score. NerdWallet is an excellent example of finance websites that offer free credit report information and credit score. Some credit card companies also print FICO scores on a customer’s monthly statements to help them keep track of their progress. Some will even allow you to access your credit report online.  You can also use Discover to find about your FICO score (at free of charge.  You can use this service to request annual credit reports to check for any discrepancies and errors that could hurt your score. You can dispute any errors found to help keep your record as spotless as possible.

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