4 Credit Building Tips for Financial Beginners

Loans are a valuable tool when borrowed after careful deliberation and research and not allowed to go unpaid for long periods. Debt has become commonplace in modern American society, with credit cards, mortgages, student loans and other forms of borrowing rampant.

According to CNBC, in 2021 the average individual in the U.S. had over $90,000 in debt. Obtaining a loan, whether it be a Maxlend loan, mortgage or other kind of loan, generally requires that the applicant have a good credit score. A problem arises when a person has no credit at all. For instance, a new adult just turned 18 who has never had a credit card probably doesn’t have any credit. While you may think this is not as bad as having defaulted on a bunch of loans, to many lenders it actually is. However, there exist ways to develop a credit score without accruing excessive debt.

1. Get a Credit Card

Credit card debt can get out of hand if a person spends beyond his or her means, but if managed responsibly, credit cards are just another tool. It is important to remember two things, to always pay the bill at the end of the month if possible and to not spend more money than you know you have in the bank. If you always pay your bill on time, you will never have to pay interest. Not only will you not lose money, but with the right rewards program, you might actually make enough points to get some back (though, again, this is dependent on always making good on the payment on time). Having a credit card and making regular payments also demonstrates to lenders that you can be responsible with debt.

2. Try a Credit-Builder Loan

The point of a credit-builder loan is to help you build credit. The money you borrow sits in a bank account that you usually can’t access until you pay off the loan. After all payments are made, you have shown that you can be trusted to pay off debt and you have money in savings.

3. Become an Authorized User

Ask a close family member or significant other that you know has a good record of paying the bills to add you as an authorized user to a credit card that reports credit history to credit bureaus. You don’t have to use the credit card. Simply by having your name on it, you gain the holder’s credit history.

4. Pay Your Bills on Time

Just making the payments on your water, electricity, gas and other household bills in full by the deadline makes you look more credible. Add your paid bills to your credit report by using an online rent reporting site.

Having a good credit score is imperative for obtaining mortgages, student loans, car loans and other necessary loans. Having no credit history is just as bad as having a poor one to many lenders because, while there’s nothing to show you’re a bad bet, there’s also nothing to show that you’re a good one. Taking steps to build a respectable credit history and score can help you in the future.

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