I Don’t Need a Credit Card But Want to Build Credit. What Can I Do?

Good credit is essential if you hope to borrow money one day for things like a new car or home. But good credit can also be important for smaller things like renting an apartment or even landing a new job. And one of the easiest ways to build the credit necessary for these things is by getting a credit card.

If you have no credit, or even bad credit, and you’re averse to getting a secured credit card to help improve your credit, there are other ways to go about establishing and building good credit.

Here are three other options for building credit and improving your credit scores.

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1. Get a Credit-Builder Loan

A credit builder loan is a loan with a set amount you pay back over a set period of time (referred to as an installment loan). Most have repayment terms ranging from six months to 18 months, and because these loans are reported to one or more of the three national credit reporting agencies, on-time payments will help build up your credit.

Here’s how it works: A lender places your loan into a savings account, which you can’t touch until you’ve paid it off in full, allowing you to build credit and savings at the same time. And because loan amounts for credit builder loans can be quite small (just $500) it can be much easier to make monthly loan payments.

Credit-builder loans are best for people with no credit or bad credit. But, if you have good credit but don’t have any installment accounts on your credit report, a credit-builder loan could potentially raise your score since account mix is another major credit-scoring factor.

2. Pay Your Rent 

If you’re in the process of moving or need to do so in the near future, it’s a good idea to find a landlord who reports your rent payments to the major credit bureaus. Depending on what credit report or credit score is being used, these on-time monthly rent payments can give you a quick and easy credit reference and help you qualify for a loan (or at least another apartment down the road).

3. Become an Authorized User

Asking your spouse, partner or even your parent to add you onto one of their accounts as an authorized user could give your credit a boost. If the account they put you on has a perfect payment history and low balances, you’ll likely get “credit” when that account starts appearing on your credit reports. You won’t necessarily need to use the card to benefit from this strategy. It is a good idea to have your friend or family member check with their issuer to be sure that it reports authorized users to the three major credit reporting agencies (not all do).

Remember, one of the most important things in building good credit is making timely loan and bill payments. Bills like rent or utilities may not be universally reported to the credit bureaus, but if they go unpaid long enough, they can hurt your credit, especially if they go into collection. (You can see how any collections accounts may be affecting your credit by viewing your two free credit scores, updated every 14 days, on Credit.com.)

If your credit is in rough shape, due to a collection account or other payment history troubles, you may be able to improve your scores by paying delinquent accounts, addressing high credit card balances and disputing any errors that may be weighing them down. And remember, you can build good credit in the long term by keeping debt levels low, making timely payments and adding to the mix of accounts you have as your score and wallet can handle it.

[Offer: If you need help fixing your credit, Lexington Law can help you meet your goals. Learn more about them here or call them at (844) 346-3296 for a free consultation.]

More on Credit Reports & Credit Scores:

  • The Credit.com Credit Reports Learning Center
  • How to Get Your Free Annual Credit Report
  • How Credit Impacts Your Day-to-Day Life

Image: Jacob Ammentorp Lund

The post I Don’t Need a Credit Card But Want to Build Credit. What Can I Do? appeared first on Credit.com.

Source: credit.com

6 Damaging Side Effects of Having a Bad Credit Score

Side effects of a bad credit score

As you make another large purchase against your credit card, inching closer towards maxing out, you might not realize the negative ramifications this activity will have on your credit score. The same goes for making the odd late payment on your hydro bill or car loan payment. Mounting debt that is not paid off in time or in full can have a major impact on your credit score.

A bad credit score can have more negative consequences than you may think

So what’s the big deal about having a low credit score? These days many institutions – from loan officers, to businesses, to insurance companies – look to your credit history before making a move. You could find your low credit score putting you in a position where you can’t get approved for a loan, get a job, or even find a place to live. Here are 6 damaging side effects of having bad credit.

1. Your Loan Applications Might Not Be Approved

Lenders and creditors see borrowers with poor credit as high risk, which means they’ll be less inclined to lend you the money you need. Whether you’re looking for a mortgage to buy a home, or a loan to finance a new car, you might find your loan applications being denied.

2. You’ll Be Subject to High Interest Rates

If you do get approved for a loan, you’ll most likely end up being stuck with a really high interest rate. Since lenders see people with a poor credit score as risky business, they’ll make you pay for it by attaching your loan with a sky-high interest rate. The higher your interest rate on your loan, the more you’ll be paying towards interest rather than the principle over the long run of your loan period.

3. You’ll Be Subject to Higher Insurance Premiums

Even insurance companies check background credit scores. Their claim is that poorer credit scores are associated with an increased number of claims filed. This theory prompts insurance providers to check a person’s credit background. If they find that you’ve got a credit score that’s less-than-par, you’ll most likely be charged a higher premium, no matter how many claims you’ve actually filed.

Do you know the ramifications of having a bad credit report?

Fixing a bad credit score

4. You Might Have a Tougher Time Landing a Job

Many jobs – especially ones in upper management or in the financial industry – have specific criteria that potential employees need to meet, including having a strong credit score. You might find it a lot more challenging to land the job you want because of your bad credit history, particularly if you’ve got exorbitant debts amounts outstanding, or even a history of bankruptcy.

5. Starting Your Own Business Might Be a Challenge

Not only will finding a job be more difficult with a low credit score, but even starting your own business might be a challenge. Many new businesses need the assistance of a bank loan to get started. With a low credit score, banks will be less likely to approve your loan application, even if your business idea is a great one.

6. You’ll Have a Harder Time Getting Approved for an Apartment

Even landlords check the credit history of potential tenants. If you’ve got bad credit, the landlord might be less inclined to approve a lease, and will sign it over to a tenant with good credit instead. Landlords, much like insurance companies and banks, make the assumption that those with poorer credit are more likely to be delinquent on monthly payments, which puts them at a greater financial risk.

The consequences of having poor credit may be a lot more extensive than you may have thought. Your best bet is to do everything you can to get your credit back into shape, which can be done a lot more easily with effective tools like those at Mint.com.

You can quickly and easily put your finances in order, with Mint doing all the organizing and categorizing of your spending on your behalf. By being able to see where all of your spending is going, you’ll be better able to make better spending decisions, which will only have a positive impact on your credit.

Click here for a free trial.

The post 6 Damaging Side Effects of Having a Bad Credit Score appeared first on MintLife Blog.

Source: mint.intuit.com