You can build credit fast even if you don’t have a credit score yet. While it takes time, it’s worth the wait since creditworthiness impacts your access to affordable rates on car or student loans, mortgages, and other forms of lending.
Here are some tips for building your credit rating from the ground up.
8 Ways to Build Credit Fast
1. Get a Secured Credit Card
A secured credit card is like a prepaid card. You can borrow money from your secured credit card balance once you add money to the account. This is a credit starting card for those with no credit or poor credit since they are easy to obtain. To start building your score, ensure that your lender reports your loan payments to the credit bureaus.
2. Apply for a Small Bank Loan
You may be able to take out a small personal loan against your savings account balance or even without any cash in your account. You don’t have to start big. Borrowing as little as $1,500 can impact your credit score.
3. Be Added as an Authorized Credit Line User
If someone with a consistently healthy credit rating adds you as an authorized user of their credit line, your own credit score can improve. This is a great option because you can build credit even without using the credit line.
4. Build Credit from Scratch With a Cosigner Loan
Getting a cosigner loan with your parent or guardian is one of the fastest and cheapest ways to establish credit. It is important to make all loan payments on time as any type of missed payment will not only negatively impact your credit but the cosigner’s credit also.
5. Get an Unsecured Credit Line
After six months of accessing secured loans and credit cards, you can apply to get an unsecured credit line or possibly convert a secured card to an unsecured card. With an unsecured credit line, you don’t have to put any money on the card to borrow. It’s a good way to accelerate your credit growth. Just try to keep your credit utilization below 10%.
6. Credit Builder Loans
These loans, usually amounting to between $300 and $1,000, can help build your creditworthiness. Your borrowed money may be kept in a savings account or certificate of deposit (CD) as security on the loan. Organizations like community banks and credit unions offer credit builder loans.
7. Avoid High-Interest Loans
High-interest car loans or payday loans have high default risk. Adjustable-rate mortgages (ARMs) are equally poor options for building your credit.
8. Use Different Types of Credit
Your ability to repay different types of loans can impact your credit score too. Some of the options that become available to you as you build your credit history include:
● Installment line of credit, which you pay back over time, such as a student or car loan.
● Revolving line of credit, such as a personal line of credit or home equity line of credit (HELOC)
After about six months of using credit, the credit-reporting agencies may have enough data to assign you an initial score. Remember to keep borrowing and paying back your loans.
By implementing these strategies, you can build credit from scratch or even rebuild bad credit and reduce the cost of your personal loans. Your financial situation can become even more stable if you start saving on your insurance premiums. At J. Archer Insurance Group, we can help you obtain an appropriate insurance policy. Call us today at 619-347-4700 to get a personalized insurance quote.
