It’s ideal for your financial life that you build a good credit score. It can be overwhelming when you are starting for the first time, since you may not know where to start. This score is usually reflected in your credit report. So you have to open a few accounts and manage them well so that lenders can report to the credit bureau.
As a total beginner, you need a good credit score to qualify for financing. Although, it might be difficult to find a lender who will vouch for you, don’t worry, currently, there are lenders whose role is specifically to help newbies.
In this article, you will learn the ways by which you can improve your credit score even though you are a total beginner.
Improve your credit score by reviewing your credit reports.
You can assume you do not have any credit, and you could be correct. This doesn’t mean you shouldn’t look into your reports. You have to. This is because you might meet errors either in your name or address. And you might find that an account has been set up for you without your consent. You can then rectify these issues by disputing what you found with the credit reporting agencies.
A credit card is needed to build a credit score
For you to build a good credit history and scores, you will need a credit card. This is because card issuers report everyone’s account information to the credit bureau. So if a lender doesn’t report your account to the bureau, your account won’t help improve your credit score.
It’s wise to use your credit card to create a credit profile, while, avoiding getting into debt. Interest can be avoided on your new account if you are faithful in clearing your debts every month.
When you are starting with getting a credit card, you have to be selective. The reason is so you do not get rejected for a certain account, for example, the travel reward credit card.
Also, most card issuers issue certain cards, only if, you have a good or excellent credit score. As a beginner, you should consider getting either a secure credit card, or a student credit card, or subprime credit card, etc.
A credit-builder loan is worth looking into
Credit-builder loans will help you build a good credit score, potentially, but the loans are not free. You will be charged interest and fee, but it’s a small price to pay, to build credit and emergency funds.
Read also: Ways to Cope With a Financial Loss
An authorized user strategy is a method that you use to add an account to your credit report. This entails sharing a good credit score with a friend or family member. All they have to do is call their card issuer and add you as an authorized user on an existing credit card.
The beauty of this is that credit issuers usually report user’s accounts to credit reporting agencies, and when this is done, you will have a good credit score, because, you will have years of good payment history attached to your credit profile.
There are also risks attached, in cases where your friend delays fee payments, this will affect your score. So you still have to get accounts in your name, build, and maintain it responsibly.
Practice good credit habits to improve your credit score.
Do not damage your credit profile, take conscious steps to improve it instead. This can be done by paying your credit loans on time, borrowing what you can afford to pay up, keeping an old credit account open, even though, you are not using it, increasing the age of your credit history, etc.
Read also: 3 tips to master the art of debt-free living
Build a good score by being patient.
You won’t be able to build a good credit score overnight, getting an authorized user strategy may speed things up, but, if you consciously take those steps, you can build an account that will pay off in the end.