Bad credit can be a nightmare, but a lack of credit is not much better. You need it for so many essential parts of your life, including renting an apartment, obtaining a home loan, and sometimes even getting a job.
When you have no credit history, you may not know where to start the process of building it up. Try these simple tips to get started responsibly.
Monitor Reports Thoroughly
Part of carefully building your credit requires keeping a close eye on your credit reports. You should periodically perform a credit check to monitor your score. You will also want to look over your reports to ensure there are no inaccuracies or missing information and notify the major bureaus of any errors.
Identity fraud is a serious issue that you should watch for, as well. Monitoring your history can alert you to signs of fraud and help you get ahead of the issue before it becomes a serious problem.
Become an Authorized User on Someone Else’s Card
Without any history, many lenders will turn you down. You may wonder how you can build credit when you are unable to open a revolving account or secure a loan. One way is to have someone, such as a spouse or parent, add you as an authorized user on a credit card. Doing this will allow you to begin to build up your history.
If you go this route, it is important that you can trust the person who adds you as an authorized user. If that person does not his or her pay bills on time, your own score could take a hit.
Consider a Secured Card
Another way to build credit when you have none is to apply for a secured card. Secured cards typically have low limits and require that you make a deposit. If you maintain good payment history, the issuer will likely refund this deposit. In all other ways, a secured card is just like a typical credit card.
This option is perfect for beginners, or if you are someone with a bad history who needs to start fresh, but you will want to make sure the issuer reports your history to the major credit bureaus.
Pay Your Bills On Time and In Full
The most important factor affecting your credit score is your payment history, so it is essential that you make payments on time. You should consider setting up autopay or due date alerts so that you never miss a payment.
While you will have the option to pay a minimum amount, you should try to pay your bill in full each month to prevent balances from getting out of hand. This will also help to keep your utilization rate down. This rate refers to the percent of your total limit that you are currently using. Rates above 30% tend to have a negative impact on your score.
Make More Things Count Towards Your History
In the past, payments for things like phone service, utilities, and rent would not count toward your credit history. However, there are many new tools that look at your history of making many different types of payments on time. If you have a reliable record of paying your utility, phone, or rent bills, you should look into tools that will include these payments in your credit report.
When you are first starting out building credit, you may find the process overwhelming. It can be difficult to know where to start. Fortunately, you can take simple but manageable steps that help you build credit responsibly without landing you in a mountain of debt.
Laila Azzahra is a professional writer and blogger that loves to write about technology, business, entertainment, science, and health.