How to Quickly Build Good Credit from Scratch without Adversely Impacting your Score in the Process?
Good credit is something most people strive for, but it can be difficult to obtain. Bad credit can be a deal-breaker when it comes to obtaining a loan or a mortgage, as well as higher interest rates and credit card charges. There is no quick way to improve your credit. However, if you want to improve your credit score quickly without adversely affecting your score, the tips below may be useful.
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Why Do You Need Good Credit?
Good credit is something you can’t take for granted. Most people who have good credit don't think twice about it. But in the eyes of the lenders, it says something about your financial habits and responsibilities. Opening a new credit card account, applying for a mortgage, or buying a car all require a credit check to determine your ability to repay those loans. If you have less-than-stellar credit, you might not be able to get an auto loan or mortgage or even qualify for a credit card. The good news is that it is possible to build good credit from scratch without adversely impacting your score.
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How to Get Good Credit
1) Get a Secured Credit Card.
If you don't have a credit history and want to start one, a secured credit card is the simplest way to do so. These cards are backed by funds you deposit with the issuer as collateral for your credit line. For example, if you put down $500, the issuer may grant you a $500 credit limit. When you use the card, the issuer deducts the charges from your deposit (as long as your balance does not exceed the limit). At that point, you have the option of paying off any remaining balance or allowing it to carry over with interest until the following month. The use of your deposit prevents issuers from taking on too much risk, which is why they're willing to accept it.
The goal of a secured card is to build your credit enough to qualify for an unsecured card, which does not require a deposit and offers better benefits. Select a secured card with a low annual fee that reports payment information to all three credit bureaus, Equifax, Experian, and TransUnion. NerdWallet regularly reviews and ranks the best-secured credit card options.
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2. Find a Good Co-Signer.
One of the most effective strategies for improving your credit score is positive payment history. Your credit score is determined, in part, by how well you pay your bills as agreed. If you don't have a history of making on-time payments, one way to start building a positive payment history quickly is to get a co-signer on a loan or credit card.
A co-signer promises to pay the balance if you default on the loan or the credit card. As long as you keep up with your payments, the co-signed loan or credit card will help build your credit history and improve your score over time.
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3. Get Credit for the Bills You Pay.
Making your payments on time month after month is an important way to build your credit score. It accounts for 35 percent of your score. If you're new to credit, getting a starter credit card is the best way to start building a payment history.
Experian Boost™ is another way to help build your credit scores. You can add positive information, like utility and cell phone bills, to your Experian credit reports. These bills can help show that you are a consistently responsible billpayer and may help improve your credit scores.
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4. Practice Good Credit Habits.
When you are first starting, there are some simple steps you can take to ensure that you build credit quickly and start on the right path:
Set up your accounts carefully. If you're getting a credit card, try to get one in your name only. That will make it easier to keep track of the account and any activity. And if you have a joint card with a spouse, track it carefully to make sure no unauthorized charges appear that could affect your score.
Pay bills on time. As noted above, payment history is the most important factor in your credit score. If you get into the habit of paying bills on time from the start, you'll avoid late fees and penalties, and you'll be setting yourself up for long-term success.
Use sparingly, but use regularly. The ideal way to use a credit card is to charge small amounts — for example, gas or groceries — and then pay it off at the end of each month when the bill arrives. It's convenient, it's easy to monitor and it helps develop positive payment history while keeping balances low.
Check your reports regularly. Three different major credit reporting agencies compile information about consumers' use of credit — Experian®, Equifax®, and TransUnion®. All consumers
