Most people don’t realize that having no credit is just as bad as having a poor credit score. Without a credit history, it’s impossible for lenders to determine how responsible you are as a borrower. That’s why bill repayment history and length of credit history significantly impact your Crest Financial.
Using credit is an important part of the process. If you always pay cash and avoid credit there’s no way for you to build a good record. But it’s also easy to ruin your score by taking on too much credit or not managing it properly and making late payments.
Ways to Establish a Good Payment History and Increase Your Credit Score
A good credit score is primarily a reflection of making your payments on time every time. The types of credit you use are also a factor. In general, the credit bureaus prefer people to have a mix of different types of accounts rather than just one or two. Here are a few ways you can begin building your credit from the ground up.
Retailer Credit Lines
If you are new to using credit it can be difficult to get a loan or a credit card with a decent interest rate. Retailer credit lines are one of the more viable options. Many retailers will offer customers no interest loans directly or through a leasing company. Crest Financial is one such company that works with retailers to provide “no credit needed” financing.
This is a great option because the purchase price is much more modest compared to something like a car or home. Since the risk is smaller lenders are usually willing to take a chance on a borrower with little to no credit.
Using Your Parent’s Credit History
Young adults can quickly establish a good payment history by piggybacking off their parent’s credit. This can be done by making the child an authorized user of their parent’s credit card. Another option is to have a parent co-sign on a child’s credit card. These approaches make it easier for a young adult to get a credit card, give them some oversight and connect them to their parent’s credit history.
Low Limit Credit Cards That Are Connected to a Checking Account
Banks are more willing to give a person a credit card if they already have a checking account. Just keep in mind that the limit will be low and the interest rate will be high. This option is recommended to those that can pay off the card in full every month.
A secured card is very similar to a debit card. The limit is based on a deposit of money that’s made to the card account. For example, if you deposit $500 into the account you get a $500 limit on the credit card. The key is to make payments on time and not go over the limit. If you do it can result in penalty fees and may show up on your credit report.
A gas card is a credit card that can only be used at certain gas stations. Because of this limitation and the low credit line, they are often easier to get than a standard credit card. In addition to helping you build a credit history, a gas card may also come with perks like lower fuel prices and reward points.
Pay All of Your Bills and Taxes on Time
If you don’t make phone, cable or utility payments on time it could be recorded on your credit report if a collection company has to get involved. Failing to pay your taxes will also be reflected on your credit report. For lenders these are serious red flags that are just as bad as not paying your credit card or a loan on time.
It’s also important to check your credit report at least once a year. Not only will you see your current credit score, you’ll also know what is lowering it.
Reviewing your credit report gives you the opportunity to check for errors that need to be corrected by the credit bureaus. One of the most common issues that can negatively impact a credit score is someone else’s information being incorrectly added to your report. This can occur if you have the same last name or someone has stolen your identity.
Good credit starts with spending, but it ends with managing debt responsibly.
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