The Best Way to Start Building Credit

How to Build Credit If You Have None

There are a few different ways you can look to build credit if you have none or are just starting out. Read the following to see what is best suited to you and your situation.

Piggybacking Off An Authorized User

This is the quickest, easiest, and most “pre-emptive” option you can take to start building credit as a young adult. It’s hard to establish credit when you have none but when you are added as an authorized user on another user’s account it’s the quickest and easiest way to demonstrate good payment history and good credit habits. Even though you’re an authorized user, the good payment and length of time the account has been established and all other good credit habits that were built on it are transferred to your credit as well. It’s like credit osmosis, the good credit standing transfers to you as well.

Opening Up a Secured Credit Card

When you open up a secured credit card, you are in fact getting a “good debt” which is a secured debt in the form of the credit card. The good thing about secured credit cards is that they allow consumers to diversify their credit portfolio with a secured debt at a relatively low entry point. You only need to “secure” your credit card with a bit of cash in order to get one and these cards can easily be converted to a regular credit card down the line.

Getting a Credit Builder Loan

Another option here is to get a credit builder loan. Credit builder loans are low cost and low amount loans that serve the purpose of improving your long-term credit score. Similar to a secured credit card, credit builder loans are loans designed with the purpose of improving your credit score. They’re generally low payment loans that are loans in the typical sense, meaning most people aren’t taking these loans out for borrowing purposes but instead for the purpose of improving credit.

These are some of the way’s user with little to no credit can start improving their improving their score for the long term and start establishing credit history.

How to Make Your Credit Better If You have Bad Credit

An in ideal world, nobody wants bad credit, but it’s a solvable issue given some time. We all deal with it and handle it the best way we know how. There are steps you can take in order to better your situation and set yourself up for success in the long term.

Analyzing Your Credit Report

If you already have credit established but your standing and credit scores are bad, you will want to first pull your credit report to analyze what the issues are. You can pull a free credit report with www.annualcreditreport.com. Once you have an idea of what accounts are negatively impacting your credit score and making you a bad credit candidate, you can work towards resolving the issue.

Action Steps

Write down and make note of all your accounts. Once you have the accounts written down or typed up, you’ll have a clearer picture of which accounts are negatively affecting you and can initiate a plan to work on resolving them. While you have all your accounts ready to go you can also consider creating a budget using our handy budget calculator.

Resolving Unpaid Accounts

If you see many unpaid account and accounts in collections, if you reach out to them in an effort to settle the accounts or pay them back this could positively impact your credit score. Paying accounts that have a delinquent balance will be a net positive for your credit score and will help to clean things up.

Diversifying Your Credit

After this you should diversify your credit. You can diversify your credit by getting a secured credit card and credit builder loan. The same tips apply for those with little to no credit.

These are some ways you can either build your credit or rebuild it in the long term.