At some point in our lives, we could need to borrow money for many different reasons. We sometimes need a significant amount to own a home, to buy a car, to pursue college and so on. If there’s one important key to make borrowing money easy, it would be your good credit standing.
Your credit score is a critical aspect of your finances. It is the representation of your creditworthiness. It is one of the most crucial factors that determines what offer you qualify for. Those who have good credit scores are the ones who able to get auto loans and student loans, affordable mortgages and credit cards with low interest rates. While some consumers with bad credit can still qualify for some loans, the process is not as easy. They also have to deal with expensive terms and higher interest rates.
Most lenders are hesitant to extend credit to those with poor credit scores. If you also find yourself in this situation, don’t worry because there are ways to build your credit score. It also doesn’t have to take too long to establish a good credit history. If you maintain regular credit activity, within three to six months your file could be thick enough for a credit score to be calculated. It means that it will all depend on how frequent you use credit. If you have a credit card, it should help you improve your credit score rather quickly. Frequent use of your credit card means frequent reporting of information to the credit bureaus.
Most credit card companies submit your credit information every month. This means that when you make one or more purchases every month and pay them off right away, these activities should be reflected in your credit report. Here are some other ways by which you can attain good credit.
Become an authorized user
If you can’t qualify for a credit card, you may want to consider becoming an authorized user on someone else’s credit card to improve your credit score. But before you do that, make sure that the primary account holder is a responsible card user. Make sure they pay their dues on time and that they also have a good credit standing. Also, make sure that their credit card reports authorized users. This way, your activities and payment history will reflect on your credit report.
Get a credit builder loan
You may also opt to get a credit builder loan offered by some financial institutions. Credit builder loans are usually for small amounts only, which you can pay off in shorter period like a couple of months to one year. The thing here is that you won’t receive cash when you borrow the money. There are cases where the funds will be incrementally released as you make the payments. There are also cases where you will be required to pay off the loan before you can get your money.
Pay your bills on time
The most crucial factor affecting your credit standing is your payment history. You can improve your credit score simply by making sure that you are prompt when it comes to paying your bills. As much as possible, avoid paying your bills 30 or more days late. Otherwise, your credit score will be taking a hit. If you skip out on a payment completely, expect your credit score to drop even further. You may want to consider setting automatic payments to make sure you don’t miss a due date.
Keep your balances low
Another big factor that impacts your credit score is your credit card balances. The ratio between the money you owe and your limit is called utilization. For example, you have a limit of $500 on your card and your current balance is $250. It means that your utilization is 50 percent. Your goal is to have a lower utilization. So what you need to do is to make sure you make prompt payments every month. If it’s a bit hard, make sure that your balance is as low as possible. Maintaining low balances can significantly help you rebuild your credit score.
A bad credit standing may affect your life in more ways than one. But don’t worry, you can follow these steps to rebuild your credit and achieve a good credit score in no time. A good credit score will help you get that car loan you need.