4 Best Ways to Build Your Credit from Scratch
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Credit and debt have become scary words. They conjure images of people drowning under student debt or fretting over credit card bills that have gotten out of hand. However, credit and debt are also necessary financial tools, helping you build a history that tells lenders, landlords, banks and utilities companies you’re responsible. Building a solid credit history is a critical part of becoming financially sound. Below you’ll find tips on how to successfully start and maintain a positive credit history to help secure your financial future.
One of the best starting blocks is to acquire the help of your (financially responsible) parents. If they have a credit card, your parents can add you to their account as an authorized user. Not only will this give you access to their credit line, but it will also link a credit account to your social security number, thus helping jump start your credit history. Having your parent (or parents) on your account can also serve as a safety net from spending too much or going too long without paying down your balance.
Once you’re ready to strike out on your own, try credit cards that are reputable, even if they offer smaller balances. Some cards are designed specifically for those with little, or bad, credit. Although you may have to pay a fee or put down a deposit, your overall goal is to build; this method can be a great stepping stone. You should take on small bills that connect to your phone, utilities or cable account. A solid history of paying bills that are in your name, even small ones, can help create a firm financial footing, making lenders more apt to do business with you. When trying to build credit, also keep in mind that services like credit repair companies do not help with actually building credit, only repairing credit you already have.
No matter what you’re using your credit line for each month, try to make sure it’s something that you can pay down with each bill. Think trips to the movies, not a brand new television. Having a zero balance each month not only improves your credit history, but it lowers your credit utilization ratio, which compares your overall credit line to your overall balances. Both of these will improve your credit score. If you need help paying down your credit card debt, here are some great tips.
Once you have a burgeoning credit history, don’t forget to be proactive. Negotiate lower rates, or point to your responsible use of a limited credit line to advocate for a credit limit increase. Not only will it give you more buying power, but it will also buoy your credit score, which is the ultimate goal. You can also try an online loan company to help you build different types of credit in your credit portfolio.
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