Building credit is not a single process that leads you from a low credit score to a high credit score. In effect, building credit is a lifelong process that requires quite a lot of care and attention. As a result, you can build your credit in several different ways, using common sense tools like those explained below.
Building your credit is essential for survival in modern society. Whether you like it or not, you need credit to access many of the things that Americans once took for granted. For example, you need a good credit score to:
Because credit is so inextricably linked with your lifestyle, you want to build it as soon as possible. If you have kids, you can build their credit using a few clever methods that dovetail with your search for financial freedom.
Additionally, everything is a little cheaper when you have good credit. You get the best interest rates on everything, big or small, ensuring that you pay far less money for a range of products from cars to homes and even consumer electronics or “buy now pay later” arrangements.
Start building your credit as soon as possible.
For the sake of the reader, let’s assume that you live with someone who sublets a room in their apartment to you. You own a car you bought with cash, and you have a job that does not require a credit check for employment.
If you start building your credit now, you can save up to rent an apartment, buy a house, finance a new car or even change jobs. According to U.S. News & World Report, 72% of employers conduct background checks. And, 29% of the time, those background checks include a credit check.
Auto financing requires a credit score that meets the requirements of the bank or lender. Before shopping for a car, you can build your credit and ensure you will be approved for a loan. The same is true for a mortgage — a range of federal and private lending programs publish minimum credit scores.
In the same manner, you can help your children build credit by making them authorized users on your credit cards. As long as you make your payments on time, keep your credit utilization low, your children will benefit from years of good reporting based on your credit cards. In fact, children can carry the power of those cards into the future, many times benefiting from lines of credit that were opened before they were born.
Building your credit is a multi-step process that can take on many forms. A few examples include:
A secured credit card requires a fee to hold the card, but it reports to the credit agency all the same. As a result, you can get fast approval for a card with a low credit line and a fee attached. However, the card is continually reporting — as noted — and helping your credit score every month. This kind of debt is the best way to start using credit if you have no other way to access it.
If you have a cosigner, that person’s credit score can help you gain approval for a card or loan. This method functions as a good way for kids to get their first credit cards, apartments or auto loans — using their parents as cosigners. The same can be true in any situation where a person with a good credit score cosigns for someone with a bad or below-average credit score.
Becoming an authorized user on someone else’s card will help build credit faster. As long as the card is paid on time and its utilization is not too high, you benefit by demonstrating that you use lines of credit appropriately. This option is often seen as a simple way to build credit fast, especially when you are trying to raise an already above-average score.
Ensure that you make your payments for any debt on time or before the due date. If you have trouble making a payment, ask the lender or card issuer about its grace period before you are reported late to the credit bureau. Because of the COVID-19 pandemic, many companies have debt relief programs that help you catch up or adjust your payments to meet your financial needs.
Under the Fair Credit Reporting Act, you are entitled to at least 1 free credit report every year. However, many services have appeared that allow you to review your credit at any time through an app. Additionally, the 3 major credit bureaus have mobile apps that allow you to check your credit and ensure your report’s accuracy.
If you discover inconsistencies or false data on your report, contact the credit bureau as soon as possible.
Credit-building products and services come in several different forms. Remember, most Americans are using traditional methods to build their credit. However, sometimes more assistance is required, including:
Credit-building loans are often offered in small amounts to banking customers who wish to build their credit. These loans can be used for anything, but they often provide the first taste of a line of credit for the customer. Consumers with bad credit can also use these loans to rebuild their credit. Search for banks that offer credit-building loans if you are planning to open an account.
Credit counseling or consolidation services can help you learn how to manage your credit or consolidate old debts. At times, these companies can negotiate payoff rates that help you eliminate debt, but remember that paying less than the amount owed could negatively impact your credit.
MoneyLion is a digital bank that’s focused on the future. MoneyLion offers simple banking solutions to assist regular consumers who need help with their finances. By “rewiring” the American banking system, MoneyLion can offer more to its customers, helping ordinary people manage their money properly.
The range of products and services available at MoneyLion includes:
You can also avail yourself of several financial tools that help make money management easier:
Building credit requires time, resources and patience. Using the tips above, you can build credit the right way and prepare for the future. Also, feel free to return to Benzinga often to learn more about credit, financial products, money management and investments.
Building credit requires approval for and use of lines of credit. You can start with secured credit cards, credit-builder loans or cosigned applications. As your credit grows, you can become the authorized user on an account, pay your cards and loans on time and ensure your credit report is free of inaccuracies.
If you have bad credit, many of the same tips for building credit still apply. While you may not be approved for traditional loans or credit cards, you may apply for secured cards or credit builder loans. You might also consider credit counseling or consolidation.
It can be a challenge to keep up with multiple streams of debt. Find the best personal loans for debt consolidation to manage your payments and stay on top of your finances.
Use Benzinga’s list of the best personal loans for excellent credit to get started now.
A personal loan can provide much needed cash. Take a look at our list of best personal loans for fair credit.
Use Benzinga’s list of the best personal loans for college students to find lenders and loan comparison services to get you the cash you need.
Check out Benzinga’s list of the best personal loans for medical expenses to start loan shopping today.
Use Benzinga’s list of the best personal loans for physicians to find a personal loan today.
Use Benzinga’s list of the best personal loans for retirees to connect with lenders and loan comparison services tailored to your financial needs.
Use Benzinga’s list of the best personal loans for seniors. We’ll connect you with lenders you can trust and useful loan comparison services.
Read on to find the best personal loans and lender comparison services for teachers.
Methodology: To determine the best personal loans, Benzinga analyzed over 300 banks, credit unions and financial institutions. We gave weight to personal loan options between $2,000 and $50,000 with a turnaround time between 1 and 5 business days. We also favored establishments that offer personal loans with an APR between 0% and 15%, online loan application ability and a mobile app.
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