Turned down for a loan due to lack of credit? Read this to see how to build your credit. It’s best to start these simple strategies early but, they can help re-build credit as well.
Having bad credit can make you feel like a piece of junk but, what about not having any credit. If you don’t have any credit history it can be hard to get your life going.
How do you build credit without credit being given to you? It’s a catch 22 situation. To buy a car, house or even get a good loan you have to have credit history.
If you don’t have any credit you might find yourself not being able to rent an apartment. You may be forced to live in your van, down by the river when you decide it’s time to move out of mom’s basement.
Take a look at how to build your credit below. Don’t be like a certain someone I know that couldn’t rent a car because he didn’t have a credit card. Oops!
Be an Authorized User on Someone’s Account
With someone’s blessing, usually your parents’, you can become an authorized user on someone else’s credit card account. This is a great way for responsible parents to start their young adults off with building good credit.
A willing person would put you on their credit card account. They will need your personal information like full name, address and Social Security Number.
That reminds me. Always protect your personal information. I can’t say this enough.
You don’t even need to use the credit card to start building credit. As long as the original card holder pays their bills on time you can reap the benefit of their good credit. This will help you build a good credit history.
On the other hand, you could really screw up the original card holders system. You’re not allowed to charge up the credit card if you don’t have the means to pay for it.
This original card holder will be left with your burden, and it could really hurt a relationship so, be careful. Both sides should realize the risk involved.
Get a Starter Credit Card
If you are a full-time college student some banks will let you have a starter credit card. They usually have a very low credit limit and probably a higher interest rate.
The rate won’t matter if you pay it back on time. If you don’t pay it back on time, then you will be building bad credit. Not a good idea when trying to build a credit history.
The key with any of these tips is to pay your bills on time. No exceptions.
Get a Secured Credit Card
Not a college student or, maybe they turned you down for a Starter Credit Card? Try getting a secured credit card.
A secured credit card is just like a regular credit card except for one thing. You will have to put up a security deposit in order to get the credit card. The security deposit is to protect the bank since, they don’t know how good you are at paying your bills yet.
This takes the risk away from bank lending you money, as they know they can just have what is in the security deposit if, you don’t pay them back.
The security deposit is usually a few hundred dollars but, don’t be surprised if your credit limit is only a few hundred dollars.
Remember though, this in not a means to get you into debt. This is a means for creating a credit history. Build your credit.
Make sure you make the payments in full and they will report that to the credit bureaus. In some cases your credit limit will go up very quickly. They will also report when you don’t make the payments to the credit bureaus too.
Get a Credit Builder Loan
This is a loan that you pay for first before you get the loan money. Weird? Basically you pay the loan off before you are allowed to use it.
It’s like a forced savings account. These payments get reported to the credit bureaus so missing the payment can go against you as well.
Also, you have to pay an interest on the loan. The interest usually isn’t very high but, by the time your pay for your $1,000 loan it will cost you more than $1,000.
Sounds kind of stupid huh? Remember, this is just a way to start building good credit. Sure, is will cost you a little but, if you make the payments on time you will be on the right path to building credit.
That picture doesn’t really have anything to do with this post but, I thought it was cool so I put it here.
One Way I Built credit
When I was in college I was making a fair amount of money. Well, a fair amount for a college student. I was tired of my first truck breaking down so much that I decided to try to get a newer vehicle.
I was roped into leasing a new truck for 2 years. Back then, I thought that leasing was not good. I was trying to buy a vehicle so that I would own it someday.
I didn’t have the credit to buy and I wasn’t about to ask someone to co-sign a loan for me. The dealer showed me what it would be to lease the truck for 2 years and I took it.
The terms of the lease were not very good but, I know I could afford it. I paid the payment every month on time and my credit went up dramatically.
Sure, I spent more on the truck than was necessary but, that’s kind of what you get when you don’t have credit.
These are the best ways to build your credit provided that you make the payments you incur.
- Be an authorized user on someone else’s credit card account
- Get a starter credit card (for full-time college students)
- Get a secured credit card
- Get a credit builder loan
And this one is not advised if you can go with any of the tips above. Don’t follow my path. Haha!
- Lease a vehicle
As you can see it’s a good idea to build your credit. Try you best not to start life in the real world behind. It makes getting credit to buy bigger things such as a house or a car so much easier.
Fun Story about My Credit
I remember being in my 20s and wanting to buy a new boat (before I bought my first house). What was I thinking!
Do you know what boat stand for? Bring Out Another Thousand $$$$.
Anyway, I was looking at a sweet new shiny red 21′ Crownline. It was an absolutely beautiful boat. I asked the sales lady to figure out what my payment would be on the price we settled on and she said she would have to run my credit to find out.
I said go “ahead”. I knew it was somewhere around 800 at the time. She took my information and went to here desk to start the process.
We were sitting in the boat in the showroom talking with the other sales lady and after about 10 minutes the other lady at the desk yelled out “your good, you have perfect credit”.
That felt awesome and I drove home that day with a brand new shiny red boat hooked to my truck. Those were the good ole days for sure. I miss that boat. Don’t miss the payments though!