When it comes to building credit, you must first understand what contributes to your score. Maybe you don’t have a credit history, or just a poor one. There’s a lot of factors to consider before you learn how to start building your credit.
Poor credit, or no credit can hurt you in many ways. Things like paying bills on time, balances on credit cards, these are all contributors to your score. When considering renting a home, buying a car, or other basic life needs. These can all be negatively affected by poor credit and impact your chances at a stable financial future.
With the credit repair experts at Pro Finance, we want to help you remove the life obstacle that is poor credit. Let’s go over some tips and tricks on how to start building credit.
Check Where Your Credit Stands
Before we go over how to start building your credit, you need to figure out where your credit is standing and why. Your score may not be as poor as you think, or maybe you don’t know where to start.
You can get a free credit score from any one of the three major credit bureaus: Experian, Equifax, or TransUnion.
Once you know where your credit is sitting, you can begin to create an achievable financial plan to start building your credit. Whether that’s from scratch, or from poor credit history.
Rebuilding Poor Credit
When your credit history is poor, building it back up can be a lot more difficult. You’ll have to do some damage control and prove to lenders/credit issuers that your credit history doesn’t define your possible future business with them.
It could be tougher to get approvals on loans and credit applications until you’ve started to rebuild a positive credit history. Looking on the bright side, when you start low you’ve got nowhere to go but up.
If you have a low credit score, steps to rebuilding it can add up quickly.
Even small increases of improvement may open up more financial opportunities than you have now.
New to Credit Building
If you have no credit history, the approach to building credit will include less barriers. There are some tips and tricks to building it from scratch.
One of the most common ways to build new credit is to become an authorized user on another consumer’s credit card. Such as your parents, friends, etc. You are technically just putting your name on their account for the credit history benefits.
Which will help establish your own credit in a low-risk way. Considering as an authorized user, the liability of the account doesn’t fall on you.
There are several other ways to start building your credit from new. Such as connecting your bank account to personal pay bills on time each month.
Budget and Pay Off Debts
Once you’ve looked into your credit history, the next step should be budgeting and prioritizing your income to pay off existing debts.
Paying monthly bills and credit accounts on time should be your first priority. If you can only pay the minimum, that’s okay. Though it is recommended to pay more if possible. Keeping the interest from extending the loan/credit period.
Your payment history is the single biggest factor affecting your credit score.
While trying to rebuild your credit, the worst thing you can do is let a payment go into late fees and dings on your history. These missed payments can stay on your credit report for up to seven years! That’s a lot longer than other credit dings to fall off.
Although, all open accounts and bills should be prioritized over the ones that have gone to collections.
Use a Secured Credit Card
If you can’t get approved for a credit card account, or all of your past ones have been closed, your next option could be obtaining a secured credit card.
Secured credit cards are easier for people with none, or bad credit to qualify for.
If you choose to start over with one of these credit cards, they require an upfront deposit. However much you deposit will normally be your credit limit. Though they work like a normal credit card, if you fall through on payments, the creditor uses your deposit as fallback for your bill.
To get your deposit back in full you must leave your account in good standing before closing it, or switching to a regular credit card.
This is a good way to hold yourself accountable to unpaid debts. You won’t want to lose your deposit by skipping out on your bill. Helping to form better financial habits in the future.
We suggest picking a credit card issuer that processes all payments and reports through all three of the major credit bureaus. So when you keep your balance low and follow your payment schedule it’ll land on your credit report. Helping the process of building your credit.
Follow Good Credit Habits
When it comes to building credit, it’s not just a quick fix. It’s something you must work on consistently and indefinitely. The best way to start building your credit is to first change your financial habits. Such as:
- Paying your bills on time.
- Reduce credit card balances.
- Manage your debt-to-income ratio.
- Start and put money towards an emergency fund.
- Periodically check your credit reports.
- Memorize your credit score.
- Think before closing accounts, or opening new ones.
Forming healthy financial habits is the easiest way to start building your credit. Without good credit, having a stable life can be difficult.
Do your future self a favor and start forming financial self control and good credit habits now. Then reap the benefits as many opportunities begin to surface after putting yourself in good credit standing.
Seek Credit Repair Advice
Repairing credit can be a very personal process. Some may be embarrassed, or ashamed of their finances. It can be hard to reach out for professional help when trying to build your credit. Just know that credit repair companies may be able to deliver results faster and more effectively than DIY credit repair.
At Pro Finance, we actively help you start building your credit. By doing things such as disputing any errors, or negative marks on your credit report. We also negotiate with creditors and try to get your debts back in good standing.
It’s important to keep good credit habits, especially if you’re in the process of building your credit with a credit repair company. Keep any negative marks off your credit report while you’re trying to build it to a better score. You don’t want your money going to waste.
If you’re in the process of figuring out how to start building credit, ask the experts for help. Apply online now for our services at Pro-Finance!