A good credit score can open a lot of doors. You already know you need a good score to get a loan or a credit card, but everyone from employers to landlords, to cell phone companies, to insurance companies use your credit score to determine whether they want to do business with you or not. Many of your day-to-day financial needs are in some way dependent on your credit score. So, it’s important that your score is in the best possible shape at all times.
Despite its importance, many people don’t know how to build or improve their credit score. There’s a lot of advice out there for those with bad credit, but it’s difficult to know exactly what you need to know if you simply have no or very little credit. That’s partly because no one wants to give you credit if you have none, but you can’t build credit without some credit to begin with! If you need help figuring out how to build your credit, we’ve got some pointers you can use.
1 – Try store credit cards
If you’ve applied for credit cards but been denied because you lack credit history, consider applying for store credit cards. These credit cards will usually only work at one specific retailer, though they may also work at sister stores under the same parent company. Store cards will sometimes take a risk on folks without credit when the big credit card companies won’t. Often these cards start you off with a very low credit limit, but that’s fine.
2 – Use some of the credit you have
If you do manage to get a credit card open, you may think that not using it will make your credit score better, but that’s not actually the case. The key to using these cards to build credit is to use them and then pay them off every month by your bill due date. That way you show that you’re someone who not only knows how to make payments on time, but who will use credit. After all, interest and fees are how credit cards make money and they want customers who will responsibly use their products.
3 – Pay on time
This is a big one. Once you begin to get some credit, make every payment on time. Late payments, even for small bills, will really hurt your credit score. You want to prove that you’re someone worthy of the credit you receive. If you’re unable to pay off a credit card account completely one month, at least be sure to make the minimum payment. Establishing yourself as someone who takes payments seriously is the best way to show yourself to be a good credit risk.
4 – Don’t max things out
This tip is key. While you should use some of your available credit to help build up your credit score, try not to max your accounts out and only make minimum payments. That can hurt your score. Especially when you’re first starting out, you want to keep those low balance credit cards paid off each month.