Keeping credit usage low and paying on time helps you to build Good credit. Making a good credit takes time and little tricky. It will be tough to get a loan or credit card if you have not good credit history or profile. But how you can show a good credit history and be responsible repayment if you don’t have credit at first place?
Here in this article, we will discuss on how you can build a good credit and easy way to establish credit.
Ways to Build Good Credit
Apply for Secure Credit Card
If you don’t have credit in the past and want to build credit score from basic, it will be a good to start with a secured credit card. You can also check out some of the good credit cards to apply from the best credit cards website. Because the secured card is backed by your cash deposit you pay and your credit limit is same as your deposited amount. You can say like a prepaid card, that you pay upfront and use the amount later if you were not able to pay your bill, your deposit will be used as your repayment method.
You will be able to use your credit card like other credit cards, but the thing is that you have already made the payment as a deposit and you are using the amount of your deposited balance. Your cash deposit amount will be used as collateral if you are not able to pay your card bill. You will get your money deposited back once you close your secure credit card.
Apply for Credit Builder Loan
As the name suggests, this card is mainly used to help people to build their credit. Usually, the money you borrow is kept on hold by your lender and will not release until your loan is repaid.
This seems forced saving program, and your payment is reported to credit bureaus. Community banks mostly offer this kind of loans.
Make Payment on Time
This is the most critical factor that helps you to build a good credit score. When you pay the full amount of your money to your lender on each month, it creates good credit profile. E.g., paying your credit cards, home loan interest etc. on time will automatically build a good credit score. Sometimes, unpaid bills will be sold to a collection agency, and that creates bad reputation and bad credit score. So make sure you always pay your credit card bills on time.
Keep Credit Utilization Low
Keeping your credit usage low as compared to your spending limit is essential to be on the safer side to build a credit score. Also, avoid opening too many accounts or applying for too many credit cards as it makes a part of your credit score.
Only borrow that you can afford
When you are trying to be habitual of charging only for what you can afford, it lets the lender know that you are a responsible borrower. You will find it easier to borrow money and get a new credit that you pay. Also, it helps you to get rid of excessive debt, and you might be expecting some calls from money lender about car loans, home loans, etc. because you have created good credit by this habit.
Here in this article, we discussed five ways that help you to build good credit. Do share your thoughts in the comments, if you want us to include any other thing that is important and you think we have missed.