Your credit score is used by different businesses when deciding to provide service to you such as home and auto loans, turning on utilities, getting a better rate on car and homeowners insurance, renting a home or apartment, applying for a credit card or getting a rate increase on an existing card.
Here are some ways you can establish credit and increase your credit score.
Open a Credit Union or Bank Account
Open a checking and savings account with your local credit union or bank. Establish a solid, long-term relationship with the institution. Show that you can maintain and handle your accounts in a responsible manner.
Pay On Time
It is important to pay your bills on time. Not paying your bills by the due date can have a negative impact on your credit score. FICO studied the profiles of consumers it identifies as high achievers (people with scores higher than 795) they found 96 percent of them had no late payments on their credit reports. To ensure that you always pay your bills on time consider setting up automatic bill pay or setup a calendar reminder for bill due dates.
Pay Off
Pay your balance in full each month. Use your credit card as a tool, choose a cash back rewards card.
Keep your balances low. Credit utilization is how much your credit card balance is compared to your credit limit. A lower utilization demonstrates to the credit bureaus that you can manage your finances in a responsible way.
Apply for a Credit Card
Sometimes a low credit score is due to not having a strong credit history. This can be the case for young people just starting out or people who have just never used a credit card or established any other type of credit. One way to establish credit is by getting a credit card. Look for one that offers cash back and does not charge a fee.
Become an Authorized User
Another way to establish credit is by becoming an authorized user on someone else’s card. This can help you establish credit, as long as that person has excellent credit themselves. Many parents add their children as an authorized user once they are old enough or a spouse may add their husband or wife. The card holder does not have to give the authorized user access to their credit card for this to work. They simply use their card as they always have and the authorized user reaps the benefits of the card holder’s payment history being reported to the credit bureaus. When the card holder pays their balance, it is reflected on the authorized users credit report as well and their own. This can help that person establish credit. Most credit card companies offer this service.
Apply for New Credit Only When Necessary
There are two types of credit inquiries, a hard inquiry and a soft enquiry.
Some examples of a hard enquiry are; applying for a new credit card, loan applications, new utility applications, apartment and home rental applications and more. Hard inquiries can stay on your credit report for up to two years. They can also lower your credit score.
Examples of a soft inquiry can include pre-approved credit offers, employment applications and personal credit checks. A soft inquiry will not negatively impact your credit score.
Apply For a Secured Credit Card
If you are in a situation where you don’t have the credit history to qualify for a traditional, no fee credit card a secured card is an option. A secured card can help you establish credit and then in the future you would more easily qualify for an unsecured, fee-free credit card.
A secured card works much like a traditional credit card in that you receive a credit limit and may even qualify for earned points. The difference is that a secured credit card requires you to make a security deposit to receive a line of credit, the security deposit is generally equal to what your credit limit will be.
The issuer uses the deposit as insurance, if you don’t pay your bill they can take the money you deposited.
Consider Using Experian Boost
This is a free tool provided by Experian that gives you credit for paying your monthly bills. This can include utility bills, cell phone and streaming services. Learn more here Experian Boost
Monitor Your Credit Report
Check your credit report regularly. You can use sites like Credit Karma and Credit Sesame to view your credit score.
You are entitled to a free annual credit report at the three major credit bureaus, Equifax, Experian and TransUnion. Go to AnnualCreditReport.com to request your report.
The Tech Minimalist 