Are you looking to build your credit, but aren’t quite sure how to do it?
Building credit from scratch can seem like a monstrous task. However, it’s easier than you think, especially if you have the right tips in mind.
Check out this guide to discover the top tips for building credit from scratch.
1. Take a Loan Out With a Co-Signer
One of the easiest ways to build credit is to take out a loan with a co-signer who already has good credit.
A co-signer is just someone who agrees to be responsible for the loan payments should you fail to pay your bills. A lot of people have their parents or a trusted relative act as their co-signer.
As long as the co-signer has good credit, the bank will almost always approve a loan for someone with no credit history.
2. Apply for a Starter Credit Card
Applying for a starter credit card is another great way to build your credit from scratch. Starter credit cards are different than regular credit cards in that come with:
- An annual fee
- Higher interest rates
- Lower credit limits (often $300 to $500)
- Limited or no rewards
The benefit of applying for a starter credit card is that you can easily obtain them with no credit history. And, after just a few months of use, you can build up your credit.
But, because of the high-interest rates and annual fees, starter credit cards should only be used as a temporary solution to build some credit. Once you’ve established some credit, you should switch to a regular credit card.
If you’re a college student, you may also want to consider applying for a student credit card. These cards are specifically designed to help students build credit, and you can easily upgrade your card when you graduate.
3. Become an Authorized User on Another Account
You can also build your credit by becoming an authorized user on someone else’s account.
With this method, you’ll ask someone (usually a parent or close relative) who already has a credit card and bank account. After you become an authorized user, you don’t even have to use the person’s card. As long as they pay their bills on time, you’ll be able to build credit.
But, keep in mind that this goes both ways. If they miss payments, your credit will be affected. This is why it’s important to choose someone who is responsible with their money.
4. Pay Your Student Loans On Time
If you have a college degree, then you probably have at least some college debt (you can check out this guide if you want to know the difference between good debt and bad debt).
It’s important to remember that your student loans are reported to the credit bureaus. Therefore, if you make your student loan payments on time, you’ll be able to build credit.
If you have trouble remembering to make your monthly payments, set a reminder on your phone, or set up an automatic withdrawal.
Time to Start Building Credit
Now that you’ve read this guide, it’s time to put these tips into action so you can start building credit. Before you know it, you’ll have a great credit score.
Check back in with our blog to discover more financial tips and tricks.