Having a credit card without a good credit standing, is as bad as not having one. No financial institution will be willing to offer you a loan or maybe even a job, if your credit history doesn’t portray you as a responsible credit card user.
If you wish to stay out of financial troubles, bad credit should be the last thing you let happen to you. How do you build new credit? To a new user, building new credit can be a challenging process if you don’t know the right steps to follow.
How to Build Credit
If you have been wanting to build new credit, but lack any idea of how to continue, then the following steps are what you need to get going forward. Depending on whether you are new to the credit card system or not; you will find one of these methods applicable.
Request for a Brand-new Credit
In seeking to build new credit, the first workable approach is to apply for a brand-new credit card. For first-time applicants, getting a card may not be easy-peasy. Banks will not rush to give you a card when they have no credible information about your borrowing and repayment habits.
But there’s a way to start breaking the barriers. Make an application to acquire a secured credit card. Since there’s a collateral involved with this card, most issuers easily approve it for new users. To build your credit, see here.
Apply for a Retail Store Credit Card
Unlike other card types, the requirements for this card aren’t so strict. It’s much easier for new users to acquire this card, but the downsides can be seen in the low amounts of available credit that are tied to it. Moreover, retail cards are only usable within the confines of certain retail stores. You can use this card to shop for your favorite retail products, but woe betides you if you embark on a careless spending spree. There are high interests attached.
Another way to build new credit is by riding on the positive credit of other credit card users. Provided you have a reliable credit card partner, he/she can add you as an authorized user of their credit card. Your credit will be built positively if that of your partner is good.
Pay Your Debts
Old users must live up to their credit obligations if they are to develop good credit. If you don’t pay down your balances, there’s a little hope of earning new credit. Credit utilization is a considerable factor that dictates the nature of your credit scores. Preferably, experts advise that credit card users should strive to keep their balances below 30% of their credit limits.
Take a Credit-builder Loan
There are some community banks that give special credit-builder loans to clients. Instead of borrowing money right away, users commit themselves to a fixed monthly savings plan for a specified time. When the community banks or credit unions testify your payments before the credit bureaus, you can build a good score for yourself. When the loan term ends, your money is accessible in your savings account.