WAYS TO ESTABLISH CREDIT IF YOU HAVE NO CREDIT OR BAD CREDIT: INSIDER TIPS FROM THE PROS
Are you among the millions of Americans who have no or terrible credit? Don’t worry; you’re not alone.
One of the most hurdles for persons who do not have a strong credit history is establishing credit. But don’t give up; there are ways to get credit and Build your credit score.
Owning a home satisfies the American Dream for many people. However, rising mortgage interest rates and strict lending criteria have made it difficult for many people to qualify for a standard mortgage.
Fortunately, some alternative lenders, are ready to work with less-than-perfect credit borrowers.
Lending providers offer a number of loan programs, including FHA, VA, and conventional mortgages. They may also offer reasonable rates and flexible terms.
So, How to Build Credit Fast !! and improve your credit score? It does not happen by chance.
Your score is determined by five factors.
Here are the top 5 ways to Build Credit Fast
Number 1: Get a Copy of Your Credit Report
If you have no or poor credit, you must first request a copy of your credit report. Each of the three major credit reporting companies – Equifax, Experian, and TransUnion – will provide you with a free copy of your credit report.
Once you obtain your credit reports, carefully analyze them to verify there are no mistakes. If you discover any errors, file a dispute with the credit reporting agency.
Number 2: Working on Building a Positive Credit History
Begin focusing on establishing a good credit history. Getting a secured credit card is one option.
A secured credit card is one that allows you to put down a security deposit that is usually equal to your credit limit.
For example, if your credit limit is $200, you must put down a $200 security deposit.
Making on-time payments and keeping your balance low while using a secured credit card responsibly can help you create a solid credit history.
Number 3: Loan From Lenders
Another strategy to build credit is to access to loans from a lender that reports to credit agencies.
You can use the loan to fund a big payment, such as a car or a home, or you can use it for something smaller, such as debt consolidation. To build a good credit history, simply make your payments on schedule and in full.
Most firms deal with all of the main credit agencies and can assist you in understanding your credit report, identifying negative stuff, and developing a strategy to build your credit score.
They also provide credit counseling, debt consolidation, and identity theft protection, among other services.
Number 4: Become an Authorized User
You can also build credit by becoming an authorized user on the credit card of someone else.
An authorized user has the ability to use another person’s credit card but is not legally liable for the debt.
If you have a family member or friend with good credit who is willing to add you as an authorized user on their credit card, this might be an excellent method to create a strong credit history.
Number 5: Becoming a Co-Signer On A Loan
You can also build credit by signing on as a co-signer on a loan. A co-signer is someone who agrees to be legally liable for the debt of another person if they default on the loan.
This is a wonderful method to develop credit but only co-sign for someone you know, as you will be held liable for the debt if they default on the loan.
Bonus Tip: Avoid opening too many accounts at once
You’re likely to receive several credit card offers from banks, your favorite businesses, and other private lenders while building your credit.
Sometimes those offers appear to be a smart idea, especially if they come with bonuses or a cheap interest rate. But unlike many students and recent graduates, don’t be duped by the idea of “easy credit”!
Having too many accounts open at the same time will make building your credit score more challenging.
Because each of these cards indicates another account that may create debt.
Furthermore, each time you apply for a new credit account, it appears as an inquiry on your credit report. Too many queries at the same time can have a short-term negative influence on your score.
Why Is It Important to Have a Good Credit Score?
A solid credit score is essential since it serves as the foundation for your financial future.
You’ll be able to get the best prices, terms, and conditions for items like car loans, credit cards, and apartment leases if you have a strong credit score.
Using student loans as an example, having a decent credit score might save you THOUSANDS OF DOLLARS each year.
Why? Because lenders believe you will repay them, they will charge you less interest. In fact, a low credit score will have the opposite impact.
What Is the Average Credit Score for Young Adults?
FICO and VantageScore are the two main credit scoring methodologies.
The maximum credit score available under both models is 850. No one expects you to have a pristine credit score as a novice building credit!
According to Value Penguin, the average credit score for people between the ages of 18 and 23 is 674.
According to the FICO model, this is a “Good” credit score:
- 800 to 850 – Exceptional
- 740 to 799 – Very Good
- 670 to 739 – Good
- 580 to 669 – Fair
- 300 to 579 – Very Poor
Speak with a financial advisor if you’ve never opened a line of credit and your starting score is in the “Fair” or “Very Poor” level. Your credit record may have an error, or you may be a victim of credit card fraud.
How Long Does It Take to Establish Credit?
For someone in their twenties, it takes about two years to develop credit from scratch.
It takes approximately two years because you must have at least one year of credit history as well as a few accounts with established payment history.
Our Final Thoughts
There is no way around it. Establishing credit when you have no or bad credit can be difficult. It may take time and effort, but getting your credit score back on track is possible.
The first step is to ensure that you pay all of your payments on schedule. Even if you can only make minimum payments, it is critical to demonstrate to creditors that you are attempting to settle your debts.
You should also strive to maintain your credit card balances as low as possible.
Creditors are more likely to work with borrowers who have a limited amount of accessible credit.
Finally, don’t close unused credit cards because doing so can harm your credit score.
By following these suggestions, you can begin to improve your credit rating and eventually qualify for the best terms and prices on loans and credit cards.