A daunting question for people who are not familiar with finance is how to get credit. If you don't have credit, it can seem as though you're stuck. Lenders are likely to turn you down because of your lack of credit. The good news is that you can start building your credit at the ripe age of 18! Follow these tips to get the best interest rate.
Paying bills on time
To build credit, you can keep up your payments. Keep a record of all your accounts and the due dates. Make sure to include the lender, minimum monthly payment, and the total balance owed. Then, divide that list into categories according to whether you pay automatically or manually. If possible, you should change the due dates or use an automatic payment method. You can even set up an automatic debit amount.
Credit score is influenced by your payment history. This accounts for over thirty percent of your credit score. Make sure you pay on time. A late payment could result in a penalty or even a negative record on your credit report. You will find your credit card and loan information on your credit report. However, utilities and phone numbers may also be listed. It can help you build your credit score by paying all your bills on time.
Multiple credit cards
Although multiple credit cards might sound like a great idea it can also cause financial problems. While multiple cards can make it easier to spend, this can also lead to financial difficulties and significant debt. You should avoid using multiple cards for rewards. Instead, stick with one. Only one card is best for the best results. Next, make sure to pay it off as soon and as quickly as you can. This will help to keep track your payments and prevent you from overspending.
Although having multiple credit cards can improve your credit score, too many credit cards can cause credit card debt. It's best to choose only the cards you can use responsibly and make minimum payments each month. Having multiple credit cards will also raise your credit utilization ratio, so make sure you use them wisely. Generally speaking, it's best to maintain two or three credit cards with an appropriate credit mix. It will improve your credit score if you keep track on your payments.
Increasing your credit limit
A good time to request an increase of your credit limit is after you have graduated from college, or if you have a steady income. An increase in your credit limit can make it easier for you to make smaller purchases. This will allow you to increase your spending power. It is easier than applying for a new credit card to request an increase. If you've recently been promoted or moved into a better-paying job, you can request an increase.
After your payment history has been good, contact your credit card provider to ask for an increase. While you are waiting, explain why you need a greater credit limit. If you've recently received an increase, tell your credit card issuer about the recent salary increase or your excellent payment history. Creditors will be more interested in you if your credit limit is high. But, increasing your credit limit for building credit doesn't mean that you can get a credit card with no interest or fees.
A credit builder loan
A credit builder mortgage is a great way of improving your credit score and building credit. These types of loans deposit funds in your account and require monthly payment towards the repayment. You will be reported to the major credit bureaus. On-time payments will improve your score. Your credit score will be affected if you make late payments. Credit builder loan are usually available from your bank.
A credit builder loan does not require a traditional, formal credit check, but some lenders do use your banking history (provided by ChexSystems) to determine your eligibility. A bounced check could also affect your loan approval. These loans can be obtained through many credit unions. However, you will need to sign up in order for your loan application to be approved. A membership fee of just a few dollars is required, as well as a donation to the partner charity.