Not all credit building tools are created equal, I will guide you to what's working best.
1. APPLY FOR A SECURED CREDIT CARD If you’re building your credit score from scratch, you’ll likely need to start with a secured credit card. A secured card is backed by a cash deposit you make upfront; the deposit amount is usually the same as your credit limit.
You’ll use the card like any other credit card: Buy things, make a payment on or before the due date, incur interest if you don’t pay your balance in full. Your cash deposit is used as collateral if you fail to make payments.
You’ll receive your deposit back when you close the account.
Secured credit cards aren’t meant to be used forever. The purpose of a secured card is to qualify for a card without a deposit.
Secured credit cards aren’t meant to be used forever. The purpose of a secured card is to build your credit enough to qualify for an unsecured card — a card without a deposit and with better benefits. Choose a secured card with a low annual fee and make sure it reports to all three credit bureaus, Equifax, Experian and TransUnion.
2. APPLY FOR A CREDIT-BUILDER LOAN A credit-builder loan is exactly what it sounds like — its sole purpose is to help people build credit.
Typically, the money you borrow is held by the lender in an account and not released to you until the loan is repaid. It’s a forced savings program of sorts, and your payments are reported to credit bureaus. These loans are most often offered by credit unions or community banks; at least one lender offers them online.
4. BECOME AN AUTHORIZED USER ON SOMEONE ELSE’S CREDIT CARD A family member or significant other may be willing to add you as an authorized user on his or her card. As an authorized user, you’ll enjoy access to a credit card and you’ll build credit history, but you aren’t legally obligated to pay for your charges.
Find out whether the card issuer reports authorized user activity to the credit bureaus.
Ask the primary cardholder to find out whether the card issuer reports authorized user activity to the credit bureaus. That activity generally is reported, but you’ll want to make sure — otherwise your credit-building efforts may be wasted.
You should come to an agreement on how you’ll use the card before you’re added as an authorized user. If the primary cardholder expects you to pay your share, make sure you do so even though you aren’t legally obligated.
5. GET CREDIT FOR THE RENT YOU PAY Rent-reporting services such as Rental Kharma and RentTrack take a bill you are already paying and put it on your credit report, helping to build a positive history of on-time payments. Not every credit score takes these payments into account, but some do, and that may be enough to get a loan or credit card that firmly establishes your credit history for all lenders.
Build your score with good habits building a good credit score takes time, probably at least six months of on-time payments.
A Simple Strategy for Boosting Your Scores
People often get hung up on payment history issues when they think of improving their scores.
The truth of the matter is that your payment history is only 35% of your score.
Another 30% comes from your debt utilization.
If you want to calculate your credit utilization for all your accounts, first add all the balances. Then add all the credit limits. Divide the total balance by the total credit limit and then multiply by 100. The result is your overall credit utilization.
FICO factors your overall debt utilization as well as average per account, revolving, and installment debt separately.
A little-known fact is that your revolving debt is weighted much more heavily than your installment debt.
That means if your credit cards are maxed out, then it will hurt your score, but it won’t hurt you if your loan balances are high.
Lowering your debt utilization is a very fast and effective way to get a quick score increase.
There are 2 ways to lower your debt utilization: 1) Lower your debts or 2) Increase your available credit.
Let’s focus on #2.
Increase Your Available Credit
Quick question for ya.
When is the last time you called your bank and asked for a credit limit increase?
A credit limit increase lowers your debt utilization instantly.
They will place a hard inquiry on your report, but the overall effect will be a score increase.
And if you get an interest rate reduction, too, well then that’s just bonus.
Improve your debt utilization ratio with The Stuff Clubs $20,000 credit line for all credit types, bad credit is OK because your required to pay for half at purchase and receive credit for the balance. Keeps your spending in check.
A Jewelers Club is a bit more expensive to get started 99.00 fee + a purchase of $100.00 to get started, But they report to all three credit bureaus.
A credit cardholder adds another person as an authorized user on their credit card account. Then, the entire history of that credit card account appears on the authorized user's credit report and included in their credit score. None of the cardholder's other cards or loans will appear on the authorized user's credit history, just the one card.
Being an authorized user on a credit card account that has a positive payment history would boost your score (granted the credit scoring calculation includes authorized user accounts in credit scores). On the other hand, late payments and high credit card balances for the authorized user account, could lower your score depending on the other information on your credit report.
Note: The latest mortgage credit reports use the Fico version 8 credit scoring model that only factors family and household members authorized user accounts into the scoring model.
How does rent reporting work? There are 4 simple steps to the rent reporting process.
1. Verification of your identity and rent payments: On your application, we need basic information such as your social security number, date of birth, address, and your landlord’s contact information. Your social security number ensures that your rent history is clearly matched with your credit profile.
2. Verification of your rent payments with your landlord: We work directly with your landlord to verify their identity and confirm your on-time rent payments both over the last 24 months, and in the months to come. For a fee of $50 each, we can also verify and report rent payments made to multiple landlords within the past 2 years.
3. Rent reporting to credit bureaus: We report your rent history to Transunion, one of the major credit bureaus. You receive an email notification when this is completed. We anticipate also reporting to both Experian and Equifax in the near future.
4. Tradeline creation on your credit report: A new tradeline is created on your credit report within 5-7 business days. You receive a notification when this is completed. As you continue to pay your rent each month, more information is added to this tradeline. This is why it is important to keep your subscription paid and current every month.
SelfLender.com is slick way to establishing instalment credit line.
If you have no credit or — worse — bad credit, establishing a good credit reputation can seem impossible, because no one will approve you for a card or loan.
You can use a co-signer, but that involves risk for the co-signer. You could try a secured credit card, but you have to have money for the deposit.
A chance to build or restore credit without requiring money upfront