Building credit isn’t easy, especially when you’re just starting your financial journey. Luckily, it doesn’t need to be. By taking advantage of credit-building strategies and smart financial habits, you can quickly and efficiently raise your credit score. Once your FICO credit score reaches the right level for you, you’ll be able to get approved for a home loan or car loan with much lower interest rates. With the right combination of patience and commitment, you can successfully raise your credit score and get approved for a home or car loan. Here are three simple ways to get started.
1. Pay Your Bills on Time
When possible, make direct pay your bills. This will help build your credit score by proving that you can make payments. If you have to use a bill payment service, such as online bill pay or paperless billing, make sure to set your bill due date as close to when you receive the bill as possible. This will ensure your payment gets sent as quickly as possible, which will also help.
2. Open and Use a Credit Card
Using a secured credit card can help you increase your credit score because it shows that you have an established credit history. This is because the card company takes a small amount of cash from you when you first open the account. However, if you pay that amount off in full, they’ll remove the security deposit from your account and update your credit score. After the first year, you can increase the credit limit on your card, which will also help your credit score. If you don’t plan on using your card, you should regularly pay it off, so it isn’t on your credit history as well. You can also choose to pay your bill in full every month.
3. Don’t Borrow Too Much
Borrowing too much can damage your credit score and make it difficult for you to get approved for future loans, such as a car or mortgage. You can increase your credit score by keeping your balances low and limiting the amounts borrowed. It’s a good idea to keep track of your credit score and update your financial plan accordingly. There are a number of credit-rating websites available online that can provide you with an overview of your current credit score. This can help you determine what changes you should make to improve your score. Just remember that the key is to take small, consistent steps to build your credit. No matter what your financial goal is, it’s a good idea to start building your credit now.
Building credit isn’t easy, but with a little effort, it’s possible. You can start by paying your bills on time and opening and using a credit card. By following these steps, you’ll be well on your way to raising your credit score and getting approved for a loan. Keep in mind that the key to successful credit building is consistency. If you stick to these strategies and maintain good financial habits, your credit score will rise quickly. In time, you could even become eligible for a low-interest rate loan or credit card that offers a low-interest rate.
