If you have ever experienced your credit being rejected, then you’ll know that it is not the best feeling in the world. Building credit is crucial in this world being run by money. If you don’t own a good credit score, it would be really hard to avail of credit cards, mortgages and loans. If you run a business, your personal credit score will be assessed when you will be applying for your business’ financing tools.
Here are some tips from experts on how you can achieve good personal credit:
Record Credit Upon Paying Rent
There are now website applications that allow you to report when you have paid your monthly rent and record it on your credit report. When you are young and have no credit history, this helps you establish a positive history of on-time payments. Use this as a stepping stone in building credit while you are still young. Not all credit bureaus take these small payments into account but for some, they do. This is important enough to get them approve your credit card or loan application. Having a loan or credit card securely builds your credit history for all other lenders.
Get An Emergency Fund
The easiest way to build your personal credit score is not allowing oneself to get in a situation where you can’t pay a certain bill. This is why it is crucial to have an emergency fund always available. This fund that you set aside will be the defining factor in making or missing such payments. This will conclusively determine if you will have a positive or negative credit.
Automate Monthly Payments
Fixate yourself on the goal to always pay your bills on time as this is the most important credit factor that lenders and credit institutions care about the most. You can achieve this goal of making on-time payments a habit by automating your payment of monthly bills. To do this, set a schedule to transfer payments from your account directly to your loan or credit card company. Maintaining on-time payments establishes you’re responsible and displays financial stability.
Keep Credit Utilization Low
Credit scores are based from low use of your existing credit cards and history of payments made on time. It is recommended that you have a credit utilization rate of 20% or lower. In order to clear or lessen your credit utilization, it is encouraged that you pay your balances every month in full.
Monitor Your Credit
Frequently monitor your credit. Ask a print out of your credit report from the credit bureaus, check them thoroughly and if there are errors, dispute them. Trace your credit score and if there is a symbolic drop, investigate what caused it. Each of us is entitled to one free credit report from the three main credit bureaus per year. Though this is a great advantage, experts still advise to availing a credit monitoring service especially if you maintain a tech savvy business and personal account at the same time..
Avail A Secured Loan
The best way to prove lenders that you can be trusted and responsible in paying back your debts is to show them that you are currently and actively using credit. One way to do this strategy is to avail a secured loan and make sure to always make your payments on time. A secured loan is a loan that is safeguarded by collateral provided by the borrower. This kind of loan is easier to avail even if you have a bad credit score.
Usually, credit is a quick fix that most individuals avail when they face difficulties in life. But, you can always try other options. It is usually not recommended to use credits if you are not certain how to pay them back. Or else, you will need to recover from a badly managed credit score.