- A good credit rating can help you land new jobs, loans and apartments and it can ensure that you receive favorable rates when it comes time to get insurance.
That’s why it’s important to know how to build your credit rating by taking care of all your outstanding bills on time and making sure that you don’t overspend on credit cards or in other areas of your life.
With these six ways to boost your credit rating, you’ll be well on your way to a higher score in no time at all!
1) Check your credit report for errors
Checking for errors on your credit report is one of the easiest and most effective ways to fix mistakes that might be impacting your credit score.
If you find any errors, correct them as soon as possible by contacting the relevant creditor. Some companies offer free annual reports, so keep an eye out for those.
It’s also a good idea to make sure you’re signed up for fraud alerts with all three major credit bureaus: Equifax, Experian, and TransUnion. Fraud alerts will notify you immediately if someone tries to apply for credit in your name.
You can set up these alerts by phone or online. These are great for catching identity theft before it occurs, but they won’t help once it has already happened.
To prevent this from happening to you, don’t share personal information like your Social Security number with anyone without verifying their identity first.
2) Pay your bills on time
Pay all of your bills on time and in full every month. If you can’t afford to pay the balance in full, at least make sure that you have enough money in the account to cover the minimum payment by the due date.
You should also set up a free online account with one of the three major credit bureaus (Equifax, Experian, TransUnion) and periodically check your own report.
It is important to do this because if there are errors on your credit report, it will show up as a problem when you apply for a loan or line of credit.
There may be incorrect information about how much debt you owe or where it is owed, so this is an easy way to keep tabs on any problems with your credit history before they become serious issues.
Monitor what’s being reported by signing up for alerts from each of the three major credit bureaus to monitor what’s being reported about you.
These alerts will help you quickly identify changes on your reports and, more importantly, let you know right away if anyone has applied for an unauthorized form of credit in your name.
3) Reduce your debt
Pay off all of your balances on credit cards and loans as soon as possible. This is the single most important thing you can do to build or maintain a good credit score.
Use less than 30% of your available credit: If you don’t carry balances on your credit card, use less than 30% of your available limit, which will allow room for future expenses while still maintaining an excellent rating.
Making sure that every bill gets paid by its due date will show lenders that they can count on you to be reliable in paying back debts in the future.
Don’t make big purchases right before applying for credit.
Your ability to get new loans could suffer if you apply for a loan at the same time as making major purchases such as a car, appliances, or furniture. Avoid opening too many accounts at once
4) Use a secured credit card
A secured credit card is a good way to build up your credit score.
A secured card requires you to deposit money into an account when you open the account, and the money becomes collateral for the card; if you don’t make payments, the bank has the right to take back what you deposited.
If you can make on-time payments for at least six months, most lenders will issue a regular unsecured line of credit.
The best part about using a secured card?
You don’t have to worry about paying interest charges, so it’s just like using cash.
If you have no or low income: An alternative is a guarantor loan. It’s designed for people who have no or low income, but assets they can use as collateral. The guarantor then agrees to repay the debt if the borrower defaults.
5) Become an authorized user
One way to build your credit is by becoming an authorized user on someone else’s account.
This means you’ll be able to use their account as if it was yours, but this will show up on their credit report instead of yours.
Plus, they can help you monitor and keep track of what you’re spending. They are also more likely to accept requests for additional credit cards or loans because they know that they have a built-in safety net with you as an authorized user.
If you don’t have any existing debt yet and are looking for the easiest way to start building your credit history, then getting a secured card may be for you.
These cards require a security deposit (usually equal to your credit limit) in order to get started, which protects both the lender and borrower.
Once you reach about $200-$300 worth of charges, you should contact the issuer and ask them to convert your account from a secured card into an unsecured one so you can get access to lower interest rates without having to pay off your entire balance every month.
6) Use a credit monitoring service
One way to build your credit is by using a credit monitoring service. There are plenty of them out there, so it may be worth spending a little money on one that suits you best.
This will allow you to monitor all activity on any of the three major reporting agencies: Equifax, Experian, and TransUnion.
You can also use these services to freeze access to your reports if you’re planning on applying for new lines of credit or loans.
By freezing your account, you won’t have to worry about someone else taking out a loan in your name and ruining your credit score.
When you do unfreeze it again, make sure you go through the process with each agency individually.