11 Jun 2020   /   0 comments

How To Build Or Rebuild Credit: Your Best Guide

Paul

Are you looking to rebuild your credit after a few money missteps or trying to build one for the time? Whichever divide you are on, this article is all you need to get it done simply and efficiently. You indeed need credit to have a credit score. However, you need a good credit score to get approved for loans and credit cards.

In this guide, we will explore how to build or rebuild credit to give you a good credit score. We shall consider the following:

  • How to build credit from scratch
  • Ways you can build credit responsibly.
  • How long does it take to rebuild credit

All and more will be explained to you in this guide.

How To Build Credit From Scratch For The Best Credit Score

If you are new to credit, here are a few things you can do to launch right in and get started.

Go open a credit account.

Your step in building credit is to open a credit account. You can decide to start with a secured credit card or a credit builder loan. When you apply for credit for the first time, the lender will order a credit report. This first inquiry will establish your credit report. credit score

  • Ensure you pay your bills on time

It is important you pay your bills on time, and it includes everything from credit cards and loans to rents, utilities, and cell phone plans. Some accounts which are generally not reported to a credit bureau can hurt your credit score if they are referred to a collection agency.

  • Monitor your credit

Build the habit of checking your credit report regularly. You should critically analyze it for inadequate information and ensure you to dispute any wrong information with the credit reporting agency.

You also have to understand that credit scoring company FICO requires that you have at least six months of credit history before they can calculate your credit score.

How To Build Credit Responsibly

We have discussed how you can build wealth from scratch. Now let’s consider some more specific tools that you can leverage to build it. To build credit, you will have to first apply for your first credit account.

For most people, their first credit application is for a credit card. However, if you don’t have any credit history, there is every chance that you will not qualify for one of the major credit card issuers like Visa or MasterCard. Well, there are other ways for you to build a credit history without using a credit card.

Here, you have different alternatives to traditional and unsecured credit cards.

  • Store card

The retail store cards approve applicants without credit. It is easier for you to get accepted for a card that can only be used at one store or group of stores, than a card that can be used anywhere. To get started, inquire from your favorite retailer about the options that they have.

  • Secured credit card

It requires a security deposit and gives you a line of credit that is equivalent to your deposit. When you default on paying your bill, the issuer can take the money you owe from your deposit.

You must be able to demonstrate your ability to handle your card responsibly before the issuer can allow you to have a higher credit line than your deposit.

  • Credit builder loans

If you want to understand how to build credit, credit builder loans are a great option. Like the secured credit card, most of the lenders that offer credit builder loans collect a deposit and then give you a credit limit equal to the amount you have deposited. credit score

Your deposited money goes into a savings account that will not be accessible to you until you have completely repaid the loan. You have to honor the loan agreement so the lender can send a favorable report to credit bureaus. The loans are available at a local credit union, or you can assess it through the self.

  • Certificate of deposit insured loan

A certificate of Deposit (CD) is akin to a savings account; the only difference is that For CD, you agree to let the bank hold onto your money for a period of time. In return, the bank pays you a higher interest rate than it would on a savings account.

The Length Of Time Required To Rebuild Your Credit

Although it is tougher to rebuild a damaged credit score than to build from scratch, it is doable. It will help if you start by checking your credit report to identify the areas that need improvement.

It doesn’t matter if you are new to credit or have been around for years; it takes time to rebuild a credit. So, it would help if you were very responsible for the use of your credit cards.

Conclusion 

You have seen the outlined approach we have highlighted for you to follow. Be keen to follow these guides, and your worries about building or rebuilding credit will be over.

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