How to Safely Build Credit From Scratch
If you are just turning of age, or just haven’t gotten around to establishing credit then now is the time to do so. Be aware that your credit report affects almost every financial move that you make, including purchasing a car or home. It could even affect your chance of landing a job, as employers may check your credit report as part of the hiring process. Luckily, starting from scratch when it comes to establishing credit means that you have a clean slate to work from, and the opportunity to begin on a positive note by establishing good credit, and then keeping it there. Here are five tips to help you build credit when you’re starting from square one.
Open a Line of Credit
If you can qualify for a credit card then it’s recommended that you do so to establish credit, as long as you are responsible with it. Make sure that the card’s total balance is low enough that you can pay it off every month. Keep in mind that your payment history makes up 35% of your credit score, and so how reliable you are in paying your bills on time each month is very important. Due to the fact that you’re building your credit from nothing, you have the chance to create a spotless payment history. This is why it’s savvy to keep your credit balances low, at least in the beginning.
Get a Secured Credit Card
If you cannot open an unsecured credit card, which is the standard, due to the fact that you don’t have a credit history then don’t panic. You also have the option of establishing a credit card by opening a secured line of credit. This type of credit card is just like an unsecured one except that you put down a security deposit up front in order to give the bank or creditor assurance that any debt you take on will be paid.
Pay Your Bills Each Month
It may seem overly simple, however paying at the very least the minimum amount that you’re required to pay on time each month is the best way to build up your credit, and then maintain it at a good level. Also, keep in mind that you must be patient when it comes to establishing some credit this way, as it takes at least 6 months after opening your first credit card to have enough credit information in order to formulate a credit score.
Check Up on Your Credit Report Every Half Year
Once you’ve opened up a new credit card and have been successfully paying the bill on time each month for six months then it’s time to check your credit score status. You can find out exactly what your credit report says by checking in every six months or so. Keep in mind that you should be cautious when checking your credit report online, as there are often sites that are littered with gimmicks and catches, and so ensure that you are using the real deal.
Only Apply For the Credit You Need
To begin with taking out one line of credit should be more than enough. It’s a good idea to first prove to yourself that you’re capable of keeping your credit balance low on one credit card, and are able to pay the bill every month before you even consider opening up another credit card. If you feel as though you’re ready for more credit then you may want to instead call your credit card company and request an increase in your credit limit instead of a new line of credit.