How do I improve my credit score?
Everyone wants to push their credit score up to 740–799 for a Very Good rating. After all, it can open doors to getting a car or buying a home — but that can be a difficult task, and the list of steps we gave in ‘How to Improve Your Credit Score’ is a testament to that. You’ll have to adjust your balances, fix errors in reports, and plan out monthly payments. These time-consuming steps may be the reason why Petal Card’s report on solving credit problems outlines that over 10 million adults under the age of 25 haven’t started building credit yet. Fortunately, there are more ways you can build credit. Read on to find out how.
1. Be an authorized user of someone else's credit card
If you have a family member with an excellent score, and you can convince them to add you as one of its authorized users, do it! According to a CNBC feature on ways to build credit, this setup will bump up the score of every user, as long as the card is used wisely and payments are made on time and in full. The likely result: around a 10% spike in your credit in about a month. Surprisingly, only 1 in 5 people do this simple step.
2. Get those payments reported
You are likely paying recurring bills already, like rent, utilities, and subscriptions. If you are an on-time and in-full payer, then leverage that by asking your landlord and service provider to report your payments to the three major credit bureaus. Granted, landlords and companies aren’t mandated to report your account activity, so they can refute your request. But if you were to get one or two of them to report your payments, then the impact will be significant. Remember: payment history accounts for 35% of your credit score. So, do try to get those payments reported.
3. Join a credit union, then get a credit builder loan
Joining a credit union is similar to opening a bank account, only in a “bank” that is for the people, by the people. Once you’re a member, you can take out a credit-builder loan. However, The Balance explains in ‘How to Build Credit Without a Credit Card’ that the funds from this loan will not be given to you, but instead will be kept in a savings account. Make sure you keep making timely payments, as they will reflect on your credit report, and boost your score. Then, when you’ve repaid the loan, the funds in the account will be yours.
4. Mix up your accounts
Ironically, getting more credit leads to a bigger score. This is because getting a mix of different types of credit accounts for 10% of your credit score. This could include credit cards, mortgages, home loans, or even car loans. Adding an element or two to your current mix, therefore, can mean a few more points. In this case, NerdWallet recommends getting the type of credit you don’t already have. Try to have at least one installment account (where you make equal payments for a specified time) and one revolving credit (where you can choose how much you’ll pay, like with a credit card). Just make sure you can handle the additional responsibility that comes with this new line of credit.
If you are struggling to build credit the traditional way, we hope that the above tips will help you get closer to that Very Good score.
Submitted exclusively to Sunamerican.com
An article by Kina Pressman