Why is having a strong credit score and history important?
A good credit score is vital to your financial well-being because it decides how much extra money you'll have to pay if you want to buy anything on credit or take out a loan.
Creditors and lending agencies will use your financial history to determine whether or not to lend you money or issue a credit card for you. There will be no record of how you can handle or repay your debt if you have no credit history. As a result, many lenders and creditors would not risk lending you money or providing you with credit. If you want to create a good base for your credit score, follow these guidelines that we’ve compiled for you.
1. Apply for a limited line of credit.
Do apply for small lines of credit, before moving on to broader lines of credit, such as a car loan or a mortgage. This will prevent you from wasting money on interest and bank fees and allow you to create a strong base. You may apply for secured credit cards, gas station credit cards, subprime credit cards or retail store credit cards which offer small lines of credit.
2. Apply for a secured credit card.
Secured credit cards are identical to regular or unsecured credit cards. The only difference is that you must put down your own money as a deposit. This assures the trustee or lender that you can pay back your debt. Your credit limit is normally set at the same level as your deposit.
Secured credit cards are a type of credit extension. When you use your secured credit card to make a purchase, the balance is not deducted from your security deposit. Imagine that you are borrowing money from the corporation any time you use your secured credit card or charge something, and you are obligated to repay the debt. As a result, how responsible you are with your secured credit card can have a positive or negative impact on your credit report.
3. Do not apply for several credit cards at the same time.
Don't apply for several credit cards at once when you're first beginning to build your credit history. Your credit score may be decreased by a few points each time you apply for a credit card. Start with just one secured credit card to ensure that you can keep your purchases to a bare minimum and pay it off on time each month.
4. Make timely payments on your credit card bill.
This is the most critical step in establishing and preserving a good credit history, and it seems to be the most difficult for people to master. Take the time to check and pay your bill as soon as you receive the billing. Bare in mind that even one late payment this early in the game will affect your credit score significantly. Making timely payments is a vital part of gaining control over your finances. It will eventually help to improve your credit score, and qualify for lower-interest credit and loans in the future.
5. Keep track of your credit score and records.
The time it takes for details to appear on your credit report is usually about 2 months. When something new appears on your credit report, such as a credit card or a loan, your credit score will most likely decrease before you demonstrate your ability to repay the debt. After around 6 months of on-time credit card payments, you can review your credit report and score to see how you're doing. Pay attention to what's on your credit report, including any positive or negative information. Keep an eye on your credit score as well; make sure it's improving.
These are only several tips that we’ve found for you. If you’re still not sure about your credit score, you can schedule a financial consultation with our team just by clicking the button below or contact us for more!