We all have to deal with credit at some point, especially if we want to borrow money for something, so having a good credit history is crucial. If you are just beginning to build your credit or need to start over, there are a few tips that may be able to help you achieve your goals.
Get Good Credit by Association
One way to establish a borrowing history is to become an authorized user on a family member or friend’s account who has excellent credit and makes their monthly payments. If this person is concerned about you having access to their credit, that is not a problem. You will only be an authorized user on the account and do not need to have a copy of their card. This may be an easy way for you to build your credit, but it will only work if the cardholder continues their good credit. Also, not all lenders put weight on accounts you’re just an authorized user on, so this method might not be as effective as you would like.
Ask for a Co-signer
Another way to build your good credit is to have a family member or friend with good credit co-sign on a loan. This is a big responsibility for the co-signer as they will be held responsible for whatever payments you don’t make. Keep in mind your relationship with this person may become strained if you rely on them to make your payments.
Apply for a Secured Card
With secured credit cards, a deposit is used as collateral with the credit limit usually being the amount of that deposit. Once you have proven your ability to handle the card responsibly over an extended period of time, some lenders will refund your deposit and convert the card to an unsecured product.
However, before you apply be sure to look into the lender’s reporting practices. If the lender doesn’t report to the three major bureaus, your account activity will not help your credit profile. You should also shop around to avoid secured cards with high fees, keep your outstanding balance below 20% of your credit limit, and pay your bills on time.
Vary Your Types of Debt
The types of debt you have make up around 10% of your FICO score. Lenders like to see different kinds of credit, such as fixed loans and credit cards, when offering deals on loans.
A good idea is to contact your bank or credit union to find out your options after you explain your situation. If you are an existing customer in good standing, they may be able to offer you a secured or unsecured loan. Contact use to see how we can help!