How To Build Your Credit

So you don’t have any collections, late payments, or charged off accounts on your credit, but you still struggle being approved for any loans or credit accounts?  If you find yourself constantly getting denied for credit, then you may need to focus on building positive credit history.  I know most people are asking, “Well, how am I supposed to do that when I can’t get approved for anything???”  To start building credit, or even rebuilding, you will have to start with some unconventional ways first.

Apply for a Credit Builder Loan.  Credit builder loans are great in that they usually work as a savings program that helps you build credit at the same time.  You make monthly payments as if you are paying on a loan and after 12-24 months, you will have access to the funds minus the loan origination fees.  Self-Lender has a great loan program where you can make monthly payment commitment from $25-$150.00 depending on the term.  At the end of that term, you will get the money you paid minus their loan fee.  They report to all three credit bureaus and you can decided to pay the credit builder loan off at any time.

Piggybacking.  If you have a family member or significant other that has a credit card with a fairly decent credit limit with a low balance, I would recommend asking if you can be added as an authorized user to their credit account. Capital One, American Express, Discover, and Bank of America are a few that I know report authorized users to the credit bureaus.  Always call to make sure that whomever they have their credit card with reports authorized users.  Be honest with them about your goals. Let them know that you are trying to build your credit history.  If your friend or family member keeps a high balance then it may not be a good idea to add yourself to their account.  Being added to someone’s credit account as an authorized user is a low cost option to building your credit and one I highly recommend.

Have your Rental Payments Reported.  Another way to build your credit history is to use your rental payment history! Rent reporting services such as Rental Kharma and RentTrack report your rental payments to the credit bureau to help you build positive payment history.  This can definitely help you build the credit and payment history you need to keep approved for others accounts in the future.

Apply for a Secured Credit Card.  Secured credit cards are awesome for people building their credit from scratch.  A cash deposit that you make upfront backs a secured credit card.   This deposit usually sets your credit limit, so the more you are able to deposit, the better! Keep in mind however; you do not ever want to deposit funds that you will need access to right away! To have the best impact on your credit you will want to keep you balance on your secured card extremely low (The balance each month should never be more than 30% of the credit limit).  In addition, you want to make sure that you are paying on time! Any payments that are more than 30 days past due will report on your credit and payment history accounts for about 35% of your credit score so be very mindful of this! The best time to get a secured card would be during income tax season where you may have the extra funds to put up.

Be Patient. Last but certainly not least, you’ll have to be patient because, unfortunately, building your credit file won’t happen overnight.  You want to be sure to develop good credit habits.  Always pay you bills on time, do not purchase items on your credit card that you wouldn’t be able to pay with cash, and be cautious of  establishing unnecessary loan accounts that you might not be able to afford.  I personally don’t recommend furniture accounts and department store cards as a way to build credit being that you are having to purchase things that you may not necessarily need or can even afford.  With a standard credit card you can use the card for gas purchases, bills, groceries, etc…..Expenses you would have to pay anyway. While building your credit you want to  remember that you are creating these accounts to BUILD your credit, not to get into debt! 

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