4 Pro Tips to Build or Repair Credit
The sooner you start building your credit, the better. It’s also good to know that you can repair credit if it’s already bad. These tips should improve your financial awareness and help you understand how doing your research can help you weigh your options and make all the right moves to make your credit look good.
1. Get a loan to build your credit
If you want to start building credit, a personal loan might just be a great way to do it. Many credit unions give such loans, and if you pay it off with no problems, that’s an excellent introduction to building good credit.
2. Credit card is an additional security
Getting a secured credit card is an excellent way to start building credit and prove your trustworthiness as a responsible payer. However, it’s essential that you understand the importance of choosing the right credit card. Aim for the one without costs and fees that exceed your budget.
A secured credit card allows you to borrow the means that you can use as a loan to buy the things you need. To pay that loan back, you need a cash deposit as a backup. If you regularly pay it off, that will look great on your credit report. It’s vital to understand that credit cards demand you to be very careful about how you’re using them. Make sure that you don’t spend more than you can afford and use your credit card only for emergencies.
3. Pay your own bills on time
Your bills, like utilities, your phone, and rent should be in your own name. Pay what you owe on time. You can get a credit to pay your rent as credit bureaus approve credits for such purposes. Just make sure you understand the terms to avoid ending up paying high fees for no reason.
4. Credit utilization
Credit utilization refers to the percentage of your credit that you already used. Ideal credit utilization is anything below 30%. This is one of the best ways to boost your credit score, but it’s important that you have the cash to pay for what you already used to make sure your credit utilization is below 30%.
If your credit utilization is above 30%, you need to reduce it and avoid charging too much and paying down your credit card balances. There are additional options also:
- Getting a new credit card – while you should keep your credit card numbers at a minimum to avoid owing more than you can afford, getting a new credit card provides more available credit. This could be a solution to increase your available credit if there’s a need to do so.
- Increase your credit limit – there’s always an option to increase your credit limit if the need calls for it, but that depends on your card issuer. If you have been paying your debts on time, there shouldn’t be any problems with increasing your limits.
- Pay your debts before your payment due date – if you make your payment a few days before the card issuer reports your balance, this could lower your credit utilization.