You are wondering how to build good credit? Are you worried you have no way of getting approved for credit? Here’s what you need to know. Bad credit can hinder you from financing your education, buying a home, or even getting a job. To ensure you can acquire such services, you are required to present a bank with a good credit history that shows you’ve been financially responsible in the past. Even with this, the big question is: how is one supposed to get approved for a credit card or loan if you’ve never had one in the past? No credit history? No credit card? If you’re already panicking with the thought of this, relax: this is something that can be done. Ideally, everyone starts life without credit.
This guide will walk you through valuable expert tips to get you started.
This is the easiest way, especially for a first-timer. You can open a loan account with a co-signer who already has good credit. As explained by https://www.creditstrong.com/how-to-build-credit-without-a-credit-card/, a co-signer is a person who agrees to be responsible for the loan if by any chance you stop paying your loan. In many cases, a bank will approve a loan for someone with no credit history if there’s a creditworthy guarantor on the application. For this to work, you require someone willing to put their credit rating on the line for your loan. Additionally, he or she should also have good credit themselves. If a guarantor signs a loan for you and you fail to make timely payments, the guarantor will suffer along with your own.
If you’re having issues acquiring a credit card, some options can help get you started. Some banking institutions offer credit cards tailored to help students establish credit, so research around for one. Additionally, you can also consider a checking account. While this won’t do magic to build your credit, having a positive relationship with a money lending institution can help you get a loan down the line. Finally, consider getting a secured card. These cards allow you to make a security deposit in advance for the amount you want to borrow.
Financial experts warn against people who often let their balances accrue over time. Ideally, this affects your credit score. Remember, factors like balance-to-limit ratio, utilization rate, and payment history play a vital role in your scores. Additionally, the lower your utilization rate is, the better. Generally, any balance can cause your score to decrease. However, a utilization rate of more than 30 percent can cause scores to lower more rapidly since this shows a much higher chance of default.
When it comes to building credit, more isn’t always better. If you open too many accounts, this makes you look like a greater risk to a lender. Additionally, this can impact your credit scores. This means that every time you apply for credit, an inquiry will appear on your credit report. It will appear on each statement whether you get approved for loans or not.
We also recommend letting your accounts age. Experts say that the longer you’ve had credit, the better it is for your credit score. You can leave your older accounts open as they help increase your credit age and build good credit. Finally, ensure you practice good credit habits and remember to check your credit scores and reports.