What’s the Best Way to Build Credit from Scratch?

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Building credit isn’t always easy. Especially when you’re starting out from scratch. But having good credit is a must-have if you ever want to qualify for things like loans and credit cards.

Are you in need of good credit, but not sure how to build it? In this article, we’re covering the best way to build credit, as well as tips and tricks for doing it quickly.

Best Way to Build Credit from Scratch

There are many tools and techniques for establishing and building your credit history. But it’s important to know how to use these techniques, or else you run the risk of making your credit worse. Here are some easy and effective ways to start building credit fast.

Apply for a Secured Credit Card

If you’re looking to start from scratch, the first thing you may want to do is apply for a secured credit card. These cards are backed by a cash deposit you make in advance. And the credit limit is equal or close to the deposit amount.

Secured credit cards can be used like any normal credit card. Simply buy things with the card and then pay off the balance before the due date. Just make sure to pay off the full balance or else you’ll incur interest rates.

A secured credit card is generally the prerequisite to qualifying for an unsecured credit card. When considering secured credit cards, look for options with low annual fees, and that it reports to the three major credit bureaus: Equifax, Experian, and TransUnion.

Already have a secured credit card? Then it may be time to get an unsecured one!  Just make sure to get more info about secured credit cards to find the right one for you.

Get a Credit-Builder Loan

Credit-builder loans are another great way to build credit. They’re basically a forced savings program, in which your borrowed money is held by the lender and released only when your loan has been repaid.

Get a Store Card

If you’re not sure you’ll qualify for an unsecured credit card, you can try your luck with a store card. These cards are offered by retailers and can only be used for purchases with that store or its partners. They usually have a much lower credit limit than the standard credit card, but they can carry higher interest rates.

What’s better is that these cards usually offer perks like rewards and freebies.

Take Out a Loan with a Co-Signer

One of the easiest ways to build credit is by opening a loan account with a co-signer who has good credit. This cosigner is someone who promises to take responsibility for the loan should you stop paying for your bills at any time.

Most banks will approve you for a loan as long as you have a creditworthy co-signer. To qualify as a creditworthy co-signer, this person must have good credit themselves.

Just remember, your co-signer will become legally responsible to repay your debt. Don’t go down this road unless you know you’ll be able to pay your bills.

Final Thoughts on the Best Way to Build Credit from Scratch

Building credit from scratch can seem intimidating, but it’s definitely possible. By studying up on these different tips and tricks, you can find the best way to build credit from scratch for you.

Need better personal finances but not sure where to start? Check out our personal finance blog for tips and tricks on how to save.

 

 

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