Whether you’re new to having debt or you could use a credit cleanup, building a solid credit score is important. There are several ways to do this, and there are even credit repair programs that can help if the process leaves you feeling overwhelmed.
If you’re just starting to build credit, you likely don’t have past financial mishaps looming over you. This can give you an advantage when it comes to achieving a higher score.
Here are some ideas on how to build credit, even if you’re starting from scratch:
Why Build Credit?
Building credit shows that you’re financially trustworthy. It will help you get credit cards with higher limits, mortgages with better rates, rentals, and car financing.
How to Build Credit
Building credit is simple, but it’s not always easy. Here are a few actions you can take to start the process:
Take Out Student Loans–and Make the Payments
If you’re a college student, education loans are a great way to start building credit. It’s best to get them through the federal government program (rather than a bank) for the best interest rates and repayment terms.
Taking out loans should increase your credit score because it increases the number of accounts you have open, something that’s considered when the bureaus evaluate your credit score. However, you need to make the monthly payments on your loans or your score will go down.
Pay Off Credit Cards
If you can, make extra payments on your credit cards in addition to the minimum amount required to stay current. This will help you reduce the principal amount you owe (before interest) on the cards, which will increase your credit score.
That’s because the bureaus consider your debt-to-credit limit ratio when considering your score. If extra payments are too much to pay under your current budget, simply make the monthly minimum payments. Every consecutive month of paying your credit cards on time will help increase your credit score.
Get a Cosigner
Many lenders and credit card companies won’t work with people who don’t have established credit. To mitigate this issue, if you have a cosigner, the lender will consider the cosigner’s credit as part of the approval process.
This links your loans or credit cards to the other person in addition to yours, so you’re both liable if you fail to make your payments. This arrangement makes you more trustworthy in the eyes of lenders, even if you personally don’t have a credit score.
Get Started Today
Building up credit is a great way to prepare for your financial future. You can put yourself in a better position to buy a home, finance a car, or take out other loans in the future.
If you already have credit and it could use some improvement, let The Phenix Group help. We’ll create an individualized action plan for you to help you build your credit back up. Call us for a free consultation today to see if credit repair is the right choice for you!
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