It’s often said that bad credit history is better than no credit history. While the validity of that saying is questionable, there’s no doubt that lack of credit history means having a harder time getting through life. Whether it’s financing a car, buying a home, or landing a job, credit plays a major role in achieving goals and reaching aspirations.
With that said, those looking to build credit history and raise their credit score must do so wisely. Bad credit might be technically better than none at all, but nobody wants to be put in that category. In order to build credit the right way, follow these tips:
Borrow small
Loans are one of the most useful instruments used by those looking to establish a credit history. Borrow money, pay it back, and watch your credit score blossom. It starts with finding lenders willing to work with inexperienced borrowers. Many loan companies in Albuquerque, Albany, and everywhere in between specialize in lending to those with no credit. They lend relatively small sums of money – between $500 and $1500 on average – and the borrower pays it back over the course of weeks or months. It becomes part of your credit history, providing a platform going forward.
Use credit correctly
Like loans, credit cards offer a straightforward means of building credit history and boosting your credit score. However, the similarities don’t end there; you have to pay off your balance in order to reap the credit boosting benefits of using credit cards. The best way to do so is to use credit cards for routine purchases throughout the week and pay off the balance at the end of the month. Think of it like doing what you already do with a debit card, except building credit in the process.
Pay on time
The easiest way to boost your credit score and establish good credit history is to always pay your bills on time. Doing so ensures your accounts remain in good standing. Over time, a history of reliable payments will do wonders for your credit score. If you’re unable to make your payments on time, contact your creditors as soon as possible. Many will be willing to formulate a repayment plan that prevents them from logging a negative report.
Avoid overspending
Access to loans and lines of credit are essential for building credit, but only if used within reason. For some, the ability to buy now and pay later proves too tempting to practice responsibly. They go on shopping sprees and find themselves in thousands of dollars of high-interest debt. What’s more, their debt-to-income ratio has gotten out of control, which damages their credit.
Manage finances
Your credit report doesn’t include anything about your savings or budgeting skills. However, being financially responsible will have a resonating effect on your credit history and credit score. The better you are at living within your means and managing your monthly payments, the better you look to creditors. Be smart with your money, and watch your credit soar.
Establishing and maintaining a good credit history is essential for achieving a variety of life goals. The time to start is now. What’s more, getting started is easier than most people think.
