The first way you can start to build up your credit is to become an authorized user on someone else’s credit account. Ask a trusted family member or friend with an established credit card to add you to the account. Ideally, the account you are added to as an authorized user will have a history of timely payments and be in good standing. Your credit score will be positively impacted by the account’s activity and history, while your poor credit will not negatively affect the account holder.
Payments made toward a loan or other structured financing agreement can also help build up your credit. For example, maintaining a history of timely payments toward a car loan will have a positive effect on your credit score. Instead of waiting until after you have developed a stronger credit score to purchase the car you need, consider using the purchase to assist with your credit situation. In-house financing through a dealership, more often than not, will have less strict credit worthiness standards for those with a steady income. As you pay back the financing loan, your credit history will improve. Make sure the in-house creditors report payments to a credit bureau.
Another important strategy to employ while trying to build up your credit history is to stay current on all of your accounts. Delinquent bills or those that have been sent to a collections agency have a serious and negative effect on credit scores, especially those associated with loans and household utilities. Remember that it is always better to make a partial payment toward an overdue account than to neglect payment entirely.
A secured credit card involves you paying a standard deposit, usually $500 or less depending on the specific company you work with, and are then given a credit card with a limit set to the amount of the deposit. The limit will remain at that level for a predetermined length of time, with 12 to 18 months being the average. The credit standards for approval on a secured credit card are less strict than traditional credit cards, as the company has your initial deposit to collect on in the event of nonpayment.
The best way to build up your credit is to maintain responsible financial habits. Secured credit cards, structured loans and financing arrangements can give you an opportunity to display timely payment histories while developing a positive credit history.
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