Building credit isn’t really all that hard. In this blog post, we will show you ways you can easily begin building credit in just a few simple steps. It doesn’t matter if you are a young adult just starting out with your finances. Or being a bit older and life events have caused your credit score to drop to an undesirable number.
First, we recommend that you obtain new credit when you are trying to build credit. You will need to apply for the type of credit that will help you establish or re-establish a payment history. Open up a credit account with a retail store, a major credit card, a secured card, a car loan or a passbook loan at a bank or credit union. The goal here is to prove you are able to borrow money and make payments on it each and every month so you can start building credit.
Paying Down Your Debt Helps When Building Credit
Secondly, pay down the amount of debt you owe as quickly as possible. Your credit score will take a hit if your debt ratio is above 50%. For example, if you have a $10,000 credit limit on a credit card, you need to keep your balances under $5,000. A $2.500 balance or less will raise your credit score in no time.
Keep Your Existing Credit Accounts Open
Next, the length of your credit history is one of the biggest factors in determining your credit score. Keep those old accounts open even if there are no balances and you have not used them in many months. When creditors review your credit report, they like to find a long credit history. Closing an old account will most certainly lower your credit score. Review your credit report at least once a year.
A credit report lists the full details on all your credit accounts. Creditors will use the information in your credit file to determine whether you are credit worthy. Be sure to inform the credit reporting agencies of any discrepancies you may find.
Getting a great score won’t happen overnight. But it is true that the credit score you saw last month or even last week was a snapshot of your credit file at that moment in time. Credit scores are fluid and can change anytime your credit report file is updated with new information.
Be Persistent and You Will Get the Credit Score You Deserve
If you are one of the many who seem to be living paycheck to paycheck, use these tips to begin building credit:
Set a Budget for Spending
Bottom line, you must know how much money is coming in and how much money is going out. You won’t begin building credit without doing this first. Know your credit score. Credit scores are fluid and can change anytime your credit report file is updated with new information. As you work on the building credit steps listed in this article, you will discover your credit score will quickly be on the rise.
Get an updated copy of your credit report. Viewing your credit report file is allowed by state and federal laws. You can request your annual free credit report once every 12 months from each of the three consumer reporting agencies, Equifax, Experian and TransUnion. It only takes a couple of minutes to view and print your credit report so there isn’t any reason not to do so.
Start Saving
Stop using your credit cards for all those little things that pop up in life. When you begin using cash for doctor visits or car repairs, you will quickly begin paying down any existing debt. And in turn have more cash flow for other things. That my friend is truly building credit.