Building a positive credit history can be tricky for some adults. Our credit rating begins keeping record the moment we turn 18, and many youths are not equipped with the right knowledge to efficiently navigate the world of credit scoring.
Unfortunately, schools do not teach adequate personal finance skills and not everyone goes to college. It is up to the individual to obtain the right information to comprehend the repercussions of negative and positive credit ratings fully. Here are a few specific ways to begin the journey of building a good credit history and obtaining a higher score.
Apply for a secured credit card.
A secured credit card works a bit differently than a traditional credit card. The user is required to place a cash deposit on the card before being allowed to spend. The card is used just like any other credit card, but there is a cash deposit to guard against late or missing payments.
If for some reason the payment is not made one month, the cash deposit will be utilized to pay the difference. If the deposit is never used, the full amount will be returned to the card holder once the account is closed.
Obtain a credit-builder loan.
A credit-builder loan is exactly what its name suggests. It is a loan offered by a lender that pays for itself in a sense. The loan money is held by the bank until all the payments are made. It is a way to force an individual to save.
The payments are reported to the credit bureaus, and there is always the reward of cash in the end. Most credit-builder loans are offered through credit unions of community banks, but there is at least one online lender that will issue them.
Become an authorized user on someone else’s credit card.
If there is a solid line of trust between family members, it is possible to become an authorized user on someone else’s credit card. It will build good credit for all parties involved as long as payments are regularly made and on time.
Not all credit card agencies report for authorized users, so do the research to make sure it is possible before attempting this route. Otherwise, any credit-building efforts may be in vain.
Pay the rent on time.
It is extremely common for apartment complexes and other landlords report rental payment history to the major credit bureaus. Defaulting on a lease contract or being sued for back pay will kill a good credit score instantly, so pay the rent!
Guard against identity theft.
In addition to actively building good credit, we should all keep a watchful eye out for credit fraud and identity theft. Technology has made it much easier for thieves to obtain vital personal information. Safeguard all the hard work and keep an eye on the leading credit agencies and what they have to say.