Credit history and good jobs make similar demands. A good job requires experience. Experience comes from jobs. Similarly, in order to obtain a loan, a good credit score is required. Credit history comes from payment of loans. It is a cycle.
What is the credit score in the beginning?
Your first credit history begins to show six months after your first borrowing. The standard that is being established in the credit industry is a minimum of 300 and the highest is at 850. 723 is the median number.
Building of credit score
A high outstanding debt will affect your credit score. In order to improve your finances build a high credit score, you must take loans and ensure that you pay them on time. No loans do not imply high credit score.
Application for a credit builder loan is the next best way
The purpose of this credit builder loan is to build the credit. The money borrowed is held by the lender and credited to an account. Until the loan is repaid, the money is not released. This program helps the borrower to save money before spending. The payments are regularly reported to the credit bureaus.
Apply for a loan along with a co-signer
With the help of a co-signer, an unsecured credit card or a loan can be obtained. The co-signer can be the unnamed guarantee that the loan will be repaid. He will have to repay the loan if the main person does not.
Get your name approved as an authorized user on someone else’s credit card
When a family or a partner add your name to this card as an authorized user, you can enjoy the benefits of the card and build a credit history while at the same time not be obliged to repay the money. As long as the charges on the credit card are paid on time, your credit score will be good. Ensuring that this takes place is your job. If the repayment is not done on the due date, your credit score is liable to fall.
We also help you check your credit reports regularly and look for discrepancies and errors. Keeping an eye on this number is vital because it helps you keep track of your actions and you are careful in all your financial transactions.
Get credit for rent paid
A few credit scores are built when the rent is paid to the house owner on time. The logic is similar. When the payment is made on time it should be counted just the same. On-time payment of rent helps in building a positive credit history. The disadvantage of this method is that not every credit score will take this payment into consideration. Some do and it is enough to build sufficient history to get an unsecured credit card and loans. It is time-consuming to build a good credit history. A minimum of six months is required. Once a satisfying score is achieved, all efforts must be made to retain a good score so that the future financial transactions are not compromised.
Ways to establish credit
Applying for a secured credit card is a good way to establish and build a good credit score. When you have to build your credit score from the scratch, you are better off starting with buying yourself a secured credit card. This card has a cash deposit to back it up. The deposit is made upfront while purchasing the secured credit card. The deposit amount is normally the same as the credit limit.
This cash deposit is just the collateral and will be used if the payment is not made by the due date. The secured credit card is utilized the same way as any other credit card, except that there is no security placed in a normal credit card. If this deposit is not utilized, it will be paid back when the account is being closed.
The secured credit card is usually created purely for the purpose of building credit. Once a good credit score is established, it is closed and a regular credit card is applied for. This secured credit card is used mostly by those who have no credit history or a low credit score and wish to build a good score. It is a good idea to opt for that card which has a low annual fee and is linked with all the three credit bureaus – TransUnion, Experian, and Equifax.