If you’ve never had a credit card in your life and haven’t asked for a loan, you probably don’t have credit. And if you ever plan to get approval for online loans in Missouri or anywhere else in the country, you need to have a good credit score.
So, how do you establish it when you have no loans, and how do you get a loan when you have no credit? It sounds like an impossible game of Catch 22, but everyone has to start somewhere. The truth is, there are several ways to build your credit from scratch, and they’re easy to do.
Open a Credit Card
A simple way to start building your credit is to open a credit card in your name. Use it to buy things that you would anyway, like groceries or gas, and pay it off completely every month by the due date. Each time you charge something and pay it off, you’re proving to the credit bureau and the banks that you are reliable and pay your bills on time.
If you go this route, be sure to use caution because charging purchases can be a slippery slope. Use your credit card the way you use cash and only buy what you can afford. It may be tempting to overspend, but if you do and you don’t pay off those charges, you’re ruining your credit before you even start building it.
Become an Authorized User
If you try to get a credit card, but the company denies your application, you have another option. Become an authorized user on someone else’s credit card.
Be sure to ask someone that you trust and who has good credit. Every time they make a payment on time, it helps to build their credit score and yours.
Pay Creditors on Time
We touched on this above, but it’s worth emphasizing the importance of paying your bills on time every time. That includes not only credit cards and other loans, but your electric bill, telephone, internet, and any other bill you have.
If you don’t pay your bills on time or early, those creditors could report you to the credit bureau, bringing your credit score down. A good tip for paying your bills by the due date is to set them up to autopay, so you never miss a payment.
Expand Your Limits
Once you begin to build your score and see it rising, call your credit card company and ask them to raise your limit. Increasing your limit widens the gap between what you owe and what you can borrow.
Having a low debt to income ratio tells a potential lender that other creditors trust you, so they’ll see you as a lower credit risk. It will also raise your credit score as long as you don’t use that increased limit to charge more purchases. Remember, only using 30% of the credit available to you helps you build credit.
Check Your Credit
Once every 12 months, pull your credit report from the 3 main credit bureaus, and check everything on there. By law, you can do this for free and without affecting your credit score. Reviewing your credit report every year will allow you to catch errors early and correct them before they negatively affect your score.
Enjoy Great Rates and Buying Power
Having a high credit score means that when you ask for a loan, the lender should not only approve you, but you’ll get a lower interest rate. So, follow these tips to build your credit score from scratch, keep it above 720, and take advantage of the lending world’s great rates and opportunities.