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Many younger people are under the impression that their credit scores are automatically through the roof since they haven’t done anything to hurt them. But in reality, the truth is that most young people don’t have any credit to speak of.
They need to build credit up and earn a credit score over time. And this can be difficult for some of them to do since creditors aren’t going to be lining up to extend credit to them.
Fortunately, there are some relatively easy ways to build credit if you know how to go about doing it. By learning how to build credit, you can put yourself on the right financial path in life from a young age and start raising a credit score slowly.
Want to find out how it’s done? Here are four tips on how to boost a credit score when you’re on the younger side or when you’ve simply struggled with bad credit in the past.
1. Put Your Cell Phone Bill in Your Name and Pay It Off Every Month
Is your cell phone bill in your name at the moment? If it’s not, you should try and change that immediately so that you can benefit from paying your cell phone bill each and every month.
The credit bureaus have come around to the idea of allowing people to use cell phone bills and other recurring payments to their benefit when it comes to their credit scores. As a result, you should be able to build credit by putting your cell phone bill in your name and paying it off every month.
It’ll show that you’re responsible with regards to paying your bills. It’ll also show that you’re good at doing it month after month, which will make you a more attractive borrower to all of the lenders out there.
2. Try to Obtain Your Own Credit Card
There are a lot of adults who tell young people not to get credit cards. There are so many nightmare stores about teenagers getting their hands on credit cards and racking up humongous bills and tons of debt as soon as they do.
You obviously don’t want to make this mistake. You’re going to kill your credit score if you obtain your own credit card and immediately start accumulating lots of debt.
You should, however, think about getting a credit card in your name sooner than later. It’s an excellent way to show your creditworthiness and to build credit in a short period of time.
If you struggle to convince a credit card company to extend an unsecured credit card to you, a secured credit card could be a good option. You’ll have to put some money up to get it, but it’ll give you a way to prove that you can be responsible with a credit card without putting your financial future at risk in the process.
3. Ask an Immediate Family Member to Make You an Authorized User on Their Credit Card
Having a hard time getting a credit card company to send a card your way? Another good option is asking an immediate family member to make you what’s called an authorized user on their credit card.
When you’re an authorized user on a credit card, you will, in theory at least, be allowed to use that card if you want to. But you should steer clear of actually using the card and sit back and enjoy the fact that you could use it if you wanted to.
That alone will give creditors the impression that you’re responsible with money and can handle having a credit card without going into debt. The only thing you’ll want to watch out for is becoming an authorized user on a credit card that a family member maxes out.
That could do more harm than good for you in the long run. You would be better off becoming an authorized user on a credit card that has a large available balance on it.
4. Attempt to Take Out a Credit Builder Loan
When you’re trying to build credit, you might wonder at different points why you’re even bothering to do it. “Why is credit important?” is something you’re going to ask yourself at times.
Well, credit is important because it’s going to allow you to take out loans for everything from cars and school to houses and home improvements. You’re going to need loans at various times in your life.
To prove that you’re going to be able to handle the responsibility of taking out loans, you should start things off with what is known as a credit builder loan. A credit builder loan works like this:
- You apply for a credit builder loan through a lender
- The lender approves you for a loan, but rather than sending you the money for it, they stick the money into a bank account
- You pay down the loan over time
- The lender accepts payments on the loan from you and reports them to the credit bureaus
- You finish paying off the loan and collect the original loan amount plus any interest that it has accrued on it
- You end up with the money associated with the loan and a better credit score than you had before!
Credit builder loans are a terrific way to show lenders that you can pay back loans. You shouldn’t have any trouble taking out other types of loans once your credit builder loan is paid off.
These Tips Should Be Enough to Help You Build Credit Quickly
Have you been trying to brainstorm ways to build credit? Use the tips that we’ve provided for you here to establish a credit score and then increase it.
You’ll find that all of these tips will work well when it comes to building your credit up. You shouldn’t have to wait too long to see the kinds of results that you’re looking for.
Get more great personal finance tips and tricks by checking out the other credit-related articles found on our blog.