Building credit or having a good credit history is important if you want a loan. Whether it is a car loan or a home loan, when you apply for a loan, your credit history is verified. Usually, a credit score is used to evaluate a person’s credit history. If you have a poor credit score, your chances of getting a loan at the best rate becomes almost impossible. You need to build credit so that you will find it easy to get a loan.
There is a problem here, without having good credit you will not get a loan. Without getting a loan, you cannot build good credit. There is no need to worry though; there are many ways to start building credit. We will tell you some of the ways you can start building credit.
Credit card to build credit
A good way to build credit is by getting a credit card, especially a secured credit card. This is the best way of building credit. To get a secured credit card, you need to deposit a cash amount equal to your credit limit. You can get a secured credit easily since you are making a deposit. You can use the card just like you use any other credit card. You can spend using the card and make regular payments. Since you have made a deposit, you will be forced to spend wisely. Every time you transact on the card, the card issuer will report your transaction to the credit bureau. This helps you to build good credit.
Secured loan to build credit
Another good way to build credit is by getting a secured loan, which is where the loan you take is not given to you. Instead, it is held in an account by the lender. You can make regular payments to repay the loan. Once you complete the loan repayment, the loan amount is then released to you along with the interest earned. The benefit of this loan is that you can get the loan very easily, even if you don’t have a good credit history. Once you repay the loan, your credit score will improve.
Get a co-signer
Getting a loan is difficult if you do not have a good credit history. If you can find a co-signer for your loan with a good credit history, it will help build credit. Based on the co-signer’s credit history you can get a loan. You must then ensure you repay the loan on time. This will reflect in your credit history and help boost your credit. You can get a co-signer for credit cards and loans.
Become an authorized user
You can request your parents or some other family member to allow you to be an authorized user for their card. This helps you get a card easily. Whenever the credit card holder transacts on the card, you can benefit as their transactions contribute to building your credit history. You must ensure that the primary cardholder repays the loan on time.
Follow good credit habits
You can build credit by following good credit habits like repaying loans on time, paying your entire credit card bill every month, not utilizing your entire credit and not closing your credit card (unless essential).