You can’t establish credit or until you use a credit card or take out a loan……but it’s almost impossible to get either without having credit!!? Welcome to the dilemma of how to build credit.
GET A SECURED CREDIT CARD
A secured credit card is like training wheels for a bike, you’re not meant to use either forever, and a secured card gives you credit practice. You can put a cash deposit on the card and the deposited amount typically becomes your credit line.
You are the primary cardholder with a secured credit card, which helps you establish credit better than being an authorized user on someone else’s account.
TAKE OUT A CREDIT-BUILDER LOAN
This loan is designed specifically to boost your credit history, which is great for people wondering how to build credit. You take out a loan of $1000, from your financial institution (if they offer this program, you might need to shop around). Instead of getting the $1000 right away, the money goes into a savings account for you (one you can’t access). Once you make all the payments including interest, then you get the funds.
Make sure you make your scheduled payments on time, if you are late or skip payments you’ll establish the wrong kind of credit. And bad credit is even more difficult to fix than no credit.
PAY YOUR CREDIT CARD BILLS BACK, AND ON TIME
Payment history is the most important factor lenders use to determine your creditworthiness. Constantly paying your bills late can ruin your credit, so make it a priority to be on time every month.
CHECK YOUR CREDIT REPORT AND SCORE
After all of your hard work, you’ll want to know if it’s paying off. Get a copy of your credit report from all 3 credit bureaus: Equifax, Experion, and Trans Union. Go to AnnualCreditReport.com and request a free copy. (You get 1 free copy per year from each bureau). Make sure that the information is correct, and if not contact the bureau to correct it.
Remember the higher your credit score the better the mortgage rate!!