Building Credit for Dummies
Whether you’re just starting to build credit or you’ve taken a hit or two to your credit score and now you’re trying to build it back up, there are a few things you can do to make sure you’re doing everything you can to better that score. Take a look at a few of the most important things you can be doing to get your credit on the right track.
- Avoid late payments at all costs. Late payments are a quick and easy way to send your credit score plummeting. When you pay a bill late, it’s listed on your credit report and simply paying it off won’t stop the damage from being done. If paying bills late is a problem for you because you’re forgetful, set yourself reminders or pencil in your due dates on a calendar to help you remember. Paying bills late because you’ve found yourself fallen on hard times is a little bit trickier. If you’re short on cash, payday loan options are available. Of course I (and any other advisor on personal finance with their head on the right way) would never recommend you take out one of these loans unless you really are out of other options – but if you’re stuck between that rock and hard place I recommend you do yourself a favour and go with one of the really public providers. Larger brands like these guys have invested a lot in their customer service and are keen to mitigate the volume of negative PR directed at the Wonga brand – so you can be sure they’ll be giving you a better service than you’re like to get with smaller providers. The point of this of course is to make sure your bills are paid on time so they don’t fool around with your credit score. The loan application is done online and the funds are deposited to your bank account the next business day. That means when a bill sneaks up on you, you can pay it off quickly without the extra charges and collateral damage to your credit score (you will be paying back a sizeable chunk on your payday loan however so take care of that ASAP and don’t let that repayment run over-due either or you’ve accomplished nothing!)
- Open a bank account. If you’re searching for easy ways to build and establish credit, a bank account is the first place to start. Simply opening an account won’t help you tremendously, but keeping it open and in good standing can do wonders in the long run. Just be wary about your spending habits when you finally start an account of your own as you can just as easily find your credit score slipping if you frequently overdraw your account or make any number of other common mistakes. The longer you have your account, the better your credit report will look. And be sure to go for quality over quantity because opening multiple accounts and never making use of them can just as easily cause you problems.
- Sign a lease (or get your name on one). If you’ve never signed a lease, it’s time to get started. If you’re renting on your own, you’ll have no choice but to sign a lease (and you’ll probably also have to get someone to cosign for you because of your lack of credit). By paying your rent on a regular basis, on time with no complications, you’ll be establishing a healthy credit history. If you can’t afford a place on your own, look into finding a roommate. But be sure to get all parties’ names on the lease. Not only will it help you all establish credit, it also saves you from being solely responsible for damages or late payments if your roommate doesn’t turn out as well as you’d hoped. Make sure you’ve got yourself covered, legally.
If you’re unsure about where you stand as far as credit goes, do yourself a favor and obtain a credit report with your score. This will let you know where you are and what you can do to get to an even better position.