How To Build Credit........When You Have None
One question I'm asked often is "How do I build credit when I have NO credit". It's actually not as hard as you think. Building credit is something that takes time and patience. I can promise you that it won't happen over night or in a month.....but with these simple tips you could be on your way to having better credit.
1) Store Card
I started building my credit when I was 18. The first thing I did was to get a store credit card. Here's the thing you should know about this. Most stores won't allow you to have a line of credit if you don't have credit........Yea I know!!!! Thankfully, I was able to get a Victoria's Secret credit card. I would make a purchase monthly and then I paid my bill off when it came in every month. You don't have to make big purchases. The important thing is to keep it active and PAY YOUR BILL!!!!!!!!!
2) Bank Credit Card
Most banks will have a bank credit card. My suggestion is to get a card with a low max balance. My husband and I signed up for a $500 bank credit card at the bank I was working for. The only thing we used this card for was gas. When the bill came in at the end of the month, we PAID IT OFF!!!!!!
***** It's very important to remember that when you have any sort of credit card, you ALWAYS want to pay your bill off every month. We're using these cards to build credit and not to hurt our credit. This will only help you if you use them properly. You never want to owe more than 40% of your max balance. I advise you not to get a credit card if you can't discipline yourself with it. *****
***** You NEVER want to cancel these cards. Financial Institutions prefer lending money to people with long standing credit as oppose to someone with new credit. Having long standing credit will help you build your credit score up. Put the card in a bowl of water and freeze it if that's what you have to do to stop spending but never cancel it. *****
3) Small Loan
One thing that helped build my credit the most was a small loan from my bank. I was approved for a $500 loan at my local bank. Now DON'T spend the money!!!!!! Yes you read that correctly. What you want to do is open a separate checking account and deposit the money in there. You won't be needing any checks or a debit card with this account. Every month, you will take the money out of this account to make your payment on your loan. You don't want to pay it off before term. Let the loan go all the way to term. Once the loan is paid off, get another $500 loan. You can keep doing this over and over again until you've built your credit score up. The beauty about this is that you already have the money to pay the loan. You will, however, have to pay interest but it won't be much. I did this several times and even went up to a $1000 loan.
4) Co-Sign
Another tip is to co-sign on someone's account or loan that has good credit. Most of the time this is a last resort. Sometimes people are fortunate enough to have someone that will allow this. I personally never co-signed before but I know several people that have.
The important thing to remember is that building credit takes time. As with anything, you have to work for it. It's very easy to ruin your credit if you're not careful. Never borrow more than what you can pay off. I understand credit cards are convenient, but they can also damage your credit if you abuse them.
I hope you found these tips helpful. You always have to start off somewhere. These tips also work for people with bad or little credit.
You can also check out my video for "Understanding Bad vs Good Credit"
And my blog post I did to go with the video
Leave me a comment down below if you have any questions!!!!!!
*~ Cassie ~*
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