Credit building could always be tricky. If an individual does not have any credit history, then he or she might experience some difficulty in getting a credit card, a loan, and even an apartment. And in order for these individuals to show banks and other financial institutions that they are responsible borrowers, they can choose to use several tools to establish a credit history. As such, here are some ideas with regards to credit building tools and the ways on how to properly use them.
Get a secured loan or a credit-builder loan
A credit-builder loan is a type of loan that helps people have good credit scores and build credit card. Typically, the borrowed money is held by the lender and would not be released as long as the client hasn’t repaid his or her loan. The payments made are directly reported to the credit bureaus for which a usual forced savings program is used.
Get a secured credit card
A secured card is literally secured by a cash deposit made by the client. This deposit amount is commonly equivalent to the limit of the credit. Secured credit cards aren’t supposed to be used forever. As long as this card has served its purpose then it is good to be nulled. The sole purpose of this card is to build credit enough to be qualified for an unsecured card.
Be an authorized user
Another way in building credit is by having a family member or a significant other willingly add the client on his or her card as an authorized user. In doing this, the card’s payment history will be added to the client’s files and would reduce the amount of time and effort in generating a good credit score.
Moreover, it is better to ask the original cardholder to have ideas on whether the card issuer was able to report the activity done by the authorized user to the credit bureaus. Although in general, any activity created with the use of credit card is reported, it is still better to be assured, otherwise, the efforts for credit-building will be wasted.
It takes a lot of time and records of on-time payments in order to build credit card and have good credit scores. For example, if the person aims to get a credit card, then he or she could start with a co-signed card or secured credit card or be an authorized user of another individual’s card. On the other hand, if the person wants to build credit without using the credit card, he or she can try a credit-builder loan, co-signed loan, or secured loan. Phone, rent, and other utility payments could also be used in building credits. However, if the person was able to accomplish all the requirements needed, the effort and time will all be worth it because he or she got to pay for his or her expenses, have a loan, and buy the things he or she dreams.