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September 4, 2024 at 5:23 pm #950
Kikoff
KeymasterSeptember 4, 2024 at 8:43 pm #984Kikoff
KeymasterThere are a few good ways to build credit, regardless of where you start.
- The most direct way to start building credit is to get a credit card and start using it responsibly.
- If you’re building credit from scratch though, you might find it hard to get approved since credit card companies or lenders haven’t seen “proof” yet that you’re a reliable borrower. So, your first step might be a secured credit card.
- A secured credit card works the same way as a usual credit card, except you have to put a deposit down upfront. That amount of money becomes your “line of credit,” or the limit of what you can spend at any given time.
2. Ask to become an authorized user on someone else’s credit card
- Whether you ask a friend or a family member, make sure that you trust them and can communicate openly. Becoming an authorized user on another person’s credit card can be a great starting point to build credit, letting you potentially piggyback off their good credit, but it requires a lot of trust from you and them. You have to trust that their good credit habits can continue, and they have to trust that you will be responsible when sharing their line of credit.
- If you become an authorized user on someone else’s card, you might see a positive impact on your credit, but not all credit cards help authorized users build credit. Before you start the process, double-check that the credit card company reports positive authorized user activity to the three major credit bureaus.
3. A credit builder loan might be a good option, especially if you have poor credit or no credit.
- A credit builder loan helps build a small amount of savings while establishing a credit history.
- With a traditional loan, you get all of the money you requested up front to pay for whatever big purchase you’re making. With a credit builder loan though, the lender holds on to the money, and you make a fixed monthly payment that is reported to the credit bureaus.
- If you get a credit builder loan of $2,000, at the end of the loan term you will have built up that amount in savings too (more or less depending on any interest payments, fees, or interest earned).
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