Don't be a credit ghost this Halloween! There are a ton of good ways to get your credit rolling. Here are some examples:
Ways to Build Credit from Scratch - Table of Contents
Build Credit based on Connections >> Become an Authorized User
Your family, friends, and other connections can help you start from scratch. If you have a trusted family member or friend with good credit, ask to become an Authorized User on one of their credit cards. Their stellar account activity will get reported on your credit report. This will boost your credit history.
Get a Retail Store Credit Card >> Get a Walmart or Target Credit Card
Retail stores, like clothing and grocery stores, are always offering credit cards. The Capital One Walmart Rewards card and Target REDcard are good examples.
These tend to have lower approval requirements. These tend to be easier to obtain and can come with some great bonuses, BUT watch out for the high interest rates and hidden fees! Also, make sure there's no annual fee. ONLY use these if you can and will pay off the balance every month.
Apply for a secured credit card
Secured credit cards are a great way to build credit if you're a credit ghost. Secured credit cards are far easier to qualify for than your typical (unsecured) credit card. Plus, you can use a secured card just like a traditional (unsecured) credit card. Just practice responsible credit behavior.
The main difference between secured and unsecured credit cards is you’re required to make a security deposit in order to receive a line of credit. The deposit amount typically starts at $200 (or even as low as $49). This becomes your credit limit. If you make a $200 security deposit, you’ll get a $200 credit limit. Easy-peasy.
Take Out a Credit Builder Loan
A credit builder loan helps you build credit as you make loan payments. The key is that credit builder loans are easy to qualify for. Even if you have little to no credit history.
Payment history is 35% of your credit score. That's the single biggest factor. By making on-time payments on a credit builder loan, you can establish healthy payment habits that help build a good credit score over time.
Credit builder loans work very differently from a typical loan. The lender deposits the amount of the loan (usually $300 to $1,000 according to the Consumer Financial Protection Bureau) into a savings or CD account. Here's the kicker: you can’t access the money until your loan is repaid.
Basically no risk to the lender, right? Right. That's why you don't need any credit history.
What about all that interest you paid? Sometimes, you get back a portion of the interest you paid.
The term for a credit builder loan is usually 6-24 months. That's how long you have to pay them off.
Warning: like any other loan, late or missing payments on a credit builder loan will hurt your credit score. Don’t take out a credit builder loan if you’ll have a hard time paying it back on time.
Build Credit by Paying Monthly Bills on Time >> Utility & Cell Bills
Some financial institutions offer credit-building tools for a monthly fee. However, Experian provides one of these tools for free. It's called Experian Boost™.
Experian Boost™ lets you get credit for paying ON TIME your monthly utility bills, cell phone bills, and even streaming service bills. Qualifying streaming payments currently include Netflix®, HBO™, Hulu™, Disney+™ and Starz.
0 Comments