Perhaps you have just graduated from high school, a vocational school, or college. You may also be a bit older and decide that it is time to grow up, to get a place of your own and to start taking responsibility for your finances, instead of simply spending every penny of your paychecks, as in the past. If so, you may decide it is time to build your credit, but how can you do this when you have no credit, or a very poor credit score?
Apply for a credit-builder loan in order to establish credit or to bring up your existing credit score. Go online and apply for a loan at such places like Upstart (read our review here) or Self-Lender. You can also inquire about this type of loan from a bank or credit union where you have a checking or savings account. This type of loan keeps the money safely in a bank account while you make payments to the loan.
Once you have paid the loan in full and have established credit in your name, you can withdraw the full loan amount. The only requirement for a credit-builder loan is that you make enough money to pay back the loan. Look for a loan that has payments that you can manage easily. Also, look for terms limits that aren’t lengthy, such as a 24-month loan. You can research online loan reviews to get an idea of what loan works for you.
Once you are approved for the credit-builder loan, make your payments on time, every single month. It is a wise idea to schedule the payments two or three days early to ensure that it is credited to your account by the due date. On time or early payments look great on your credit. Don’t get into the habit of making payments during the ‘grace’ period. This is a period of time where you can make a payment after the due date without it being reported to the credit bureaus as being late. Making payments on time or early is a fantastic habit that will help your credit score to soar over time.
Once you establish a credit score, it will be much easier to obtain credit so that you can rent an apartment, get a loan for a car, home, or other necessity.
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