3 Ways To Build Up Your Credit

Saturday, August 22, 2020, 6:00 AM | Leave Comment

Credit is the ability to borrow money from lenders with the understanding that you will pay it back in full on time, with a credit score indicating how credit-worthy a borrower is.

The higher your credit score is, the more attractive a borrower you will appear to lenders, therefore making you more likely to be approved for loans and mortgages.

However, you may previously have been unable to repay loans on time due to a variety of reasons, from being made redundant to filing for bankruptcy to having to give up work to care for a sick family member.

Whatever the circumstance may be, you may need to access a loan while having a low credit score, for instance, finding a mortgage for a house. Here are three ways you can build your credit score quickly.

  1. Get a personal loan

    You might need a loan with a specific reason in mind. You could, for instance, have a dream wedding to plan or want to renovate your house or purchase a new automobile. Or you might require a loan to finance more stressful life events, such as medical treatment or funeral costs.

    Personal loans can help you to build credit if you pay them back on time. These loans allow you to borrow a set amount of money at a fixed interest rate, to be paid back with monthly installments over a set payment period. To make repayment easier, make sure you only borrow an amount that you’re confident you can repay on time to build up a positive payment history.

  2. Get a secured credit card

    A secured credit card will help you to build your credit score from scratch. This will be backed by a cash deposit made upfront, with the deposit acting as your credit limit. You can then use your secured credit card as you would any other card: making purchases, then repaying by the due date, and incurring interest if you fail to pay your balance in full.

    By repaying before the due date, you will build up your credit score and make it more likely that you will be approved for an unsecured credit card. Secured credit cards aren’t designed to be used permanently, and you will get your deposit back when you close your account, providing that you don’t have an outstanding balance.

  3. Become an authorized user on a credit card

    You could ask a family member whether they would be willing to add you as an authorized user on their credit card. This ensures that that card’s payment history is added to your credit files, so make sure you choose a primary user who pays their credit card balance on time.

    Likewise, becoming an authorized user gives you even more incentive to make your payments on time as your ‘lender’ is a family member. Missing payments as an authorized user could have a negative impact on both your family member’s credit score and your relationship.

When it comes to taking out a much bigger financial loan, such as a mortgage, you stand a better chance of being approved by taking the necessary steps as outlined above, to build up your credit.

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