Your credit score is important, it is what is used to make a lot of important financial decisions. New credit cards, home loans, car loans, and mortgages all used your credit score to make a determination. Unfortunately we don’t all have the best credit scores. While you may be able to get one or more of these various financial accounts with a bad credit score, your terms will not be good. You will end up paying way more than you need to. There is hope, there are a variety of ways you can build your credit score, even without a credit card.
Opening a credit card may be extremely hard for some people so they will want to go other routes for improving their credit. In addition, they might not be able to open a credit card due to bad credit. Use these methods to improve your credit without opening a credit card. Some of them are easier than you probably thought they were.
Thoroughly Read Through Your Credit Report
Some people have bad credit and don’t even know why. It is important that you review your credit report thoroughly and regularly. You are allowed to retrieve one free credit report for free per year. There are also a variety of credit report websites that will allow you to perform soft pings on your credit score. These soft pings do not damage your credit score but can allow you to get information on your credit status.
If you find something you don’t understand on your credit report speak with a financial analyst or look it up. There are occasionally errors on credit reports and if you catch them you can correct them. Catching an error on your credit report can significantly repair your credit depending on the issue. The process for correcting errors depends on the type of error that you find.
Knowing your credit report also helps you to better target what you need to do to repair your scores.
For any financial accounts you do have whether it’s a loan, mortgage, or even rent, make sure that you pay on time. Late payments are reported to the credit bureau and can significantly hurt your credit score. Having a bad history of payments can actually affect your credit score more than having all of your credit cards maxed out. Rent is reported to the credit bureaus as well late utility payments and the like. Reporting late rent or utility bills isn’t mandatory and your landlord can choose to forego that.
If you are late on one payment it isn’t the end of the world. Just make sure to not let it happen again.
Ask Companies To Report
There are plenty of bills out there that you pay regularly. Your cellphone bill, cable bill, and utilities. We all have bills like this but very few companies report these bills to the credit bureaus without being asked. Try asking the companies that you pay regularly to report to the credit bureaus. Payments make up 35% of your credit score.
It is best not to ask companies to report your payments if you regularly make late payments. Bad payments will hurt your credit score.
Get Authorized On Someone Else’s Credit Card
A family member such as a parent, brother, sister, or spouse may already have a credit card that is in good standing. You can become authorized as a credit card member on someone else’s account even if you never use it. This allows you to build credit as long as the other person takes good care of their credit card. You should be careful with this option because you are as liable for their credit debt as they are.
There are three standard credit reporting bureaus: Equifax, Experian, and TransUnion. While a lot people don’t know the names of the three credit bureaus they know that they exist in some form or another. What many people don’t realize is that there are a few other credit bureaus out there that specialize in helping those people who have no credit or bad credit. These credit bureaus will build up a credit score for you based on your payment of bills and/or rent.
One such bureau is the PRBC or Payment Reporting Builds Credit. You submit a minimum of three bills or other regular payments and they will monitor them to generate a score for you. Just like a typical credit bureau you receive a score between 300 and 800 based on your payment history and other information obtained from bills. PRBC goes to a credit score known as the expansion credit score from FICO.
Many places still aren’t using the expansion credit score or PRBC reports. However, you can still use it at some places that don’t check it. Request they check the credit score and if they can’t, bring in a copy of the report when you are having your credit analyzed for a loan or other financial purposes.
Credit Builder Loans
Credit bureaus and some smaller banks offer a special kind of loan called a credit builder loan. With a typical loan you receive money from a bank to spend on something such as a new car or to pay a deposit immediately. A credit builder loan is different. The money you pay off goes into a special account that earns interest. At the end of the loan you get the money back plus the interest. Despite the fact that you get the money back, a credit builder loan still counts as credit so it boosts your credit score.
Most credit builder loans are $1,000 or less and are typically paid off within one or two years. If you have the money to pay off such a loan it is a perfect way to build your credit score because you get money back in the end.
Attending college can do more than help you get a job, it can help you rebuild your credit. Apply for a federal student loan and pay it over time in installments. This will help you build up your credit. You don’t want to pay the loan off right away though. Instead, store the money in a savings account that earns interest and pay the account off regularly. This will help to better build your credit score.
College will also help you to get a higher paying job which can lead to being able to pay off any outstanding credit earlier.
Get a Car Loan
Car loans are a great option for building up your credit because you can get them at really low APR rates if you have good credit or good payment history. Even if you don’t have the best credit in the world you can typically get better rates for a car loan then a loan from a bank or another source.
You also have the benefit of getting a car. You don’t want to sign up for a car loan that you can’t pay off though. Look for a car that you can afford. Many car places will allow you to finance used cars. There are also insurance plans for those who are making car payments. These plans will pay off your remaining balance should you get into a car accident.
Get a Co-Signer
If you find that you are having trouble getting loans of any kind or have a bad credit score when applying for an apartment consider getting a co-signer or guarantor. A co-signer tells the bank or landlord that you have someone who is willing to back up your credit. Should there be a problem with your payments the guarantor will be responsible for making payments. Your co-signer/guarantor must have good credit and when they are being used to back you for rent they typically must make three to five times the rent.
There are a lot of different options to build your credit when you have bad credit or no credit. Before you get into any deal make sure that you check the terms and conditions. The sooner you start rebuilding your credit the sooner you will have a better score. A better credit score will help you in many ways down the road.