7 credit hacks you need to know

HOW TO BUILD CREDIT

Establishing credit history can take time.  Without any credit history it may be difficult to get a loan or even a credit card.  The following credit building tools can effectively help you achieve your financial goals of establishing good credit history:

  1. Secured credit card  

A secured credit card is a credit cards that has prepaid funds in which you deposit upfront.  The deposited amount essentially becomes your credit limit.  A secured credit card can be used just the same as any credit card.  Use it to make purchases and make the monthly payment on or before the due date.  You can avoid paying interest if you pay your balance in full.  Should you close the account you will receive your deposit back.  The purpose of a secured credit card is to show enough positive credit history to qualify for an unsecured credit card with the same creditor.  It is important that the secured credit card has a low annual fee and reports to all three credit bureaus, Experian, Equifax and TransUnion.

2. Credit builder loan or secured loan

A credit builder loan is a loan where the funds borrowed is held by the lender and not released until the loan is repaid.  Payments are reported to the credit bureaus.  Typically these type of loans are offered by credit unions or community banks.  With a secured loan the funds are deposited in the bank and used as collateral. 

3. Co-signer

A co-signer is someone in your life that already has established good credit history.  It is possible to get a loan with the help of a co-signer.  However there are risks the co-signer should clearly know about up front the most important one being they will be responsible if you are not able to repay the loan back.

4. Authorized user

Being added as an authorized user to someone’s account can help build credit history.  Once added as an authorized user the card’s payment history becomes part of your credit file.  It is crucial the person adding you to their credit card as an authorized user has positive long time credit history with one time payments.  You can benefit from the positive credit history without even possessing or using the credit card.  The credit card should be reporting to all three credit bureaus to guarantee the positive credit history is added to your credit file.

5. Get credit for your bills

There are third party services that will help report the bills you are already paying to the three credit bureaus.  Rent reporting services such as LevelCredit and Rental Kharma will report you positive monthly rental payment to your credit reports.  Experian Boost offers reporting for your cell phone and utility bills.

6. Check your credit reports and credit scores

As a consumer you are entitled to a free copy of your annual credit report from all three credit bureaus, Experian, Equifax and TransUnion.  It is imperative you obtain these reports and read them over to keep track of your progress.  There are several free credit websites and apps that can help you track your credit score such as Credit Karma or Credit Sesame.  You should be disputing all errors and inaccuracies on your credit reports to make sure your credit history is correct and positive.

7. Practice good credit habits

Building credit history takes time so it is important you protect it at all costs and not ruin it in any way.  You want to appear creditworthy to all potential creditors going forward.  Practicing healthy credit habits will make you sure while you build your credit history you also keep it positive.

Make ALL of your payments on time including credit cards, secured loans, utilities and any other bills you should have.

Keep your credit utilization low which is the percentage of your credit limit in use.  This amount should be below 30%.

Avoid applying for multiple credit accounts too frequently.  Credit applications should be spaced out six months.

Credit history should go as far back as possible.  Keep you credit card accounts open they will only help your overall credit utilization and increase your account average age.

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