Your credit score is an important factor in your financial health. A good credit score opens many great opportunities for you, such as favorable loans and credit cards. Having this access is essential in modern living as society’s dependence on credit is increasing.
One out of ten adults in the United States doesn’t have any credit history. These individuals are said to be credit invisible because they are not recorded in any credit bureaus. Aside from the no credit history, these individuals are people who have thin-credit, which is hard to score.
If you are a young adult and you are just starting to plan on purchasing your first car, you should consider building up your credit history for you to ensure that you can get the best deal available. Here are the things that you can do to establish your credit score for the first time.
Become An Authorized User
Having a good credit score will give you access to the prime rate of loans and credit cards from reliable lenders like Credit Ninja. One of the things you can do to start building your credit score is to become an authorized user on someone else’s credit card. You should ensure the primary cardholder has a great credit score and has a good payment history.
One of the best options is to ask your parents to add you to one of their credit cards, so long as they have great credit. Even if you are not going to use the card, you will still benefit from it, and your credit score will still improve based on the primary card holder’s credit history. You can use the authorized card anytime, and the primary cardholder is the one responsible for paying for your card’s purchases. As a responsible adult,though, you should voluntarily pay what you spent using the card.
Get Your Credit Card
If you are a college student who is starting to build your credit history, you can get a college student card. This type of credit card doesn’t require you to have a credit history, which is why it is the best first step you can take to build a credit score early. You only need to be at least 18 years old to qualify.
If you are not a student, you can opt for a secured credit card as traditional credit cards require you to have a credit history for a credit check. With a secured credit card, you will have to make an initial deposit as a security for the credit card company. This is the best option to start building your credit and help you transition into a traditional credit card.
Acquire A Secured Loan
A secure loan is a personal loan that will require you to have collateral as a security. This type of loan allows bad credit individuals or those taking the first step in building their credit history.
Secured loans pose lower risks to the lender due to the collateral. Thus the interest rate is much lower than that of an unsecured loan. Even if you do not need extra cash, you can borrow a small amount and use it to pay for your bills. Your main purpose here is not the money but to start creating your credit history.
Consider A Credit-Builder Loan
Another loan you can take to start a good credit history is the credit-builder loan. It is solely made available for credit newbies that want to develop a good credit record. This type of loan is not widely promoted and is offered only by small lenders like community banks or credit unions.
When you get approved for a credit-builder loan, the money you borrowed will be held in a bank account while you are repaying it. You cannot access the money if you haven’t fully paid the principal loan amount and the interest rate. It is like saving money while building your credit history. However, credit-builder loans are only applicable to individuals who have existing debt.
Report Bills Payment
Although your positive payment history with utility bills is not reported to the credit bureaus, you can still use your payment history to build good credit. Experian Boost is the first-ever service that lets you instantly improve your credit score using credits you acquire for paying your utility, streaming services, and telco bills regularly and on-time.
You will just have to link all your monthly payment obligations into your credit record. However, Experian Boost requires you to have at least one credit card or personal loan to sign up.
Start Building Your Credit Score Now
There is no perfect age to start to build your credit score. As long as you are of legal age and have a stable income, you are eligible to start building a credit history. It is best to start young so that you can more easily qualify not just for purchasing a car, but also for emergencies and other types of loans on your own. However, it is never too late to build a good credit score as long as they are responsible enough to face your obligations.