It is quite difficult to build your credit rating when you don’t have credit to begin with. Fortunately, there are doable ways to achieve this, and these tips should help you if you decide to go down that path.
Start by Opening a Savings Account
Once you’ve made up your mind about establishing your credit history, the first place to look into is your savings account. If you don’t have one yet, visit your preferred bank and open an account. Preferably, you must have a separate savings account from your direct deposit account where your salary is being sent. Having a savings account alone is not enough to raise your credit score, but it helps train you in managing your finances correctly, thus preparing you when handling more serious financial matters in the future.
Apply for a Secured Credit Card
While you’re in the bank, might as well apply for secured credit card. Getting a regular credit card may be too difficult for first-timers, plus you might not be given the best rates and features. With a secured card, a certain amount from your savings will be held and will not be available for withdrawal. This serves as a sort of collateral, in case you won’t be able to make payments. Secured credit cards are very easy to qualify for those with little to no credit. After a year, if you’ve been good with your payments, you can reapply to convert this card into a regular one and get back your security deposit.
Find a Guarantor
If it’s a struggle getting a loan, and you don’t have the extra money to put in as collateral, perhaps you can ask a friend or a family member with good credit history to become your loan guarantor. In essence, the guarantor is there to take full responsibility of your loan, and promises to make the payments should you fail to do so. Just be careful though, because you will put another person’s reputation at stake here.
Sign up for Utilities
While this advice may be counterintuitive if you’re trying to save money, you might want to keep your cable and landline phone for a little while longer when you’re trying to build credit. These can be additional records in your credit history which providers would like to see. Of course, you’d have to make payments on time or else this will be useless. It may also be wise to apply for a mobile phone contract if you’re a heavy user in order to save money and build your credit at the same time.
Be Sure to Keep Different Types of Credit
Your credit score is determined by using various criteria, and one of these is the types of credit that you have. Providers prefer seeing different kinds of records under your name such as credit cards, utilities, student loans, auto loans, etc. This gives them the confidence that you are able to manage whatever type of credit that you have, thus simply owning a credit card won’t do the magic trick.