Are you looking to start a credit strategy? Whether you’re brand-new to credit or need to repair your credit, it can be difficult to convince lenders you’re worth the risk. Here are some credit management strategies for anyone with credit problems who needs a legitimate and workable path to improving their credit.
Find Out Exactly What Your Credit History Is and Isn’t
If you’re building credit for the first time, odds are you won’t have any credit history to pore over. Just to be on the safe side though, and to practice doing it, check your credit rating to make sure there aren’t any surprises. Federal law allows everyone one free credit check a year.
If your credit is poor and you’re ready to start a credit risk management strategy to improve it, you should also run a credit check on yourself. Make sure all the information included is accurate, and if there are any discrepancies, dispute them. Just because you’ve made some poor decisions doesn’t mean you should suffer for decisions you didn’t make. Once you have a good sense of what’s affected your credit score the most, you’ll be better prepared for the ups and downs of the credit approval process.
Become an Authorized User
One of the most straightforward paths to building credit is to become an authorized user on someone else’s credit card. Whether it’s a parent, a close friend, or an older sibling, getting your name on someone else’s account can help you build a good credit history. You don’t even need to use the card — your name on the account is sufficient. Just be sure that whatever card you become an authorized user on belongs to a person who is good with their money, always makes payments on time or early, and never maxes out their limit.
Get a Secured Credit Card
Another good way to build up credit is to start with what’s called a secured credit card. To get one, you make a cash deposit. The amount of that deposit is usually the same amount as your credit limit. You then use the secured credit card exactly as you would a regular credit card, buying things in person or online, making payments, incurring interest if you don’t pay the card off each month. When you close the account you get back your deposit. In the event that you stop making payments on your card, the lender keeps your deposit. Secured credit cards are a good path to building up credit, so you can one day move on to a better credit card, like a fuel saver credit card.
Get a Co-Signer
Even without credit or with bad credit, it’s sometimes possible to get a credit card or a loan with a co-signer who has good credit. While it might seem at first glance to be similar to becoming an authorized user on someone’s card, getting a co-signer carries different risks. Namely, the person who is co-signing needs to understand that if anything happens to you or your ability to pay back the loan or any credit card purchases, they’ll be legally responsible for repayment.
Act Like Someone With Good Credit
Once you’ve gained entrance to the world of credit, be sure to make choices that will enable you to continue in it. Make payments on time. Keep balances on your credit cards at no more than 30% of their limit. Don’t borrow more than you can pay back, and as your credit improves, be sure to take advantage of it. Trade up for better credit cards that offer better perks, like earning cash back or saving on airline tickets.
Sources:
https://www.nerdwallet.com/article/finance/how-to-build-credit
https://www.creditkarma.com/credit-cards/i/how-to-build-credit-as-a-student/