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- What Are Netting Escrows & How Does It Work?: The Best Guide - January 2, 2024
- The Secret About Prescriptive Easement: Top Guide 1 Must Know - December 4, 2023
- About Home Equity Loans In Texas And How Can One Obtain It - November 27, 2023
Ways to Build Credit Score
Building your credit score can sometimes feel like you are putting your hands in an alligator’s mouth.
So, with a little bit of patience and know-how, we can find a few ways which can boost your credit score that maybe you haven’t tried.
And that is what we are going to learn in today’s post.
When people start to get serious and take ownership of their actions and holding themselves accountable is when they will have a goal in mind!
If your credit score is holding you back from your goal, whether it be to become a homeowner, refinancing your mortgage, or buying a new car, let us get real in three ways that will let you know how to build credit score.
1. How to Build Credit Score By Lowering Credit Utilization Rate
The first thing that you can do to build your credit score is to nail down the credit utilization rate. If you haven’t heard about the credit utilization rate before, let us break it down and understand the term.
The credit utilization rate means how much credit you are using against how much credit do you have available.
For example, let us say you have a limit of $1,500 on your credit card, and you have utilized about $900 from that credit card.
This means the credit utilization rate for this card is up to 60%. In other words, that amount of money you have charged on your card, divided by the total limit itself.
If you want to nail it down, want to do something good for a better credit score, you may want to bring this credit utilization rate below 30%, which could be difficult but not impossible.
Considering the same example with the credit limit of $1,500, you may want to keep your balance below $450 to nail down that 30% credit utilization rate. This would help you to build a credit score.
Also, the credit bureaus like to see consistent on-time payments to boost your credit score. As do the loan officers who want to assess your credit profile.
The more of the healthy habits you have for your credit card practices, the more viable of a candidate you are to get a higher credit score and eventually get to your goal of purchasing your home, car, or whatever your financial goal might be.
2. How to Build Credit Score By Mixing Up Your Account Types
The second thing that you want to do to build credit score is to mix up your credit types. When we are discussing that, there is an installment loan that you can have or credit cards that you can have.
You can have these different types of loans that could have a diverse credit mix. Having a different credit mix is going to help to build your credit score.
Once you have a combination of credit types, it will show on your credit report that you have multiple credit types like an installment loan, personal loan, store credit, credit card, and car loan.
If you are paying the different loan types on time consistently all the time, as time goes by, your credit score is boosting and going higher.
What we are trying to explain here is to diversify the credit types that you have and use the credit you have responsibly and wisely in your best interest.
3. How To Build Credit Score By Considering A Credit Builder Loan
The third thing to think about, which is often overlooked, is called a credit builder loan. A credit builder loan is unlike credit cards. It is an installment account itself.
These types of loans are often available through credit unions. If you already have a credit union go down and ask them about a credit builder loan.
Unlike traditional loans, funds from the credit builder loans are held in an interest accruing savings account by the issuing lender until you pay off the loan amount in full, which generally doesn’t take more than a year.
Once paid in full, the lender will later report your activities to the credit bureaus, and as a product of that, if you have made your payments on time, your credit score will go up. So ask your credit union about the credit builder loans.
If you are not with a credit union, ask your bank if they have any similar options available for you so that you can help build your credit score.
Please don’t lose faith or get discouraged when you hear one year or two years to build up your credit. The reality is it just depends where we are starting, and we all need to start somewhere in life.
Conclusion
So, by nailing your credit utilization, mixing your credit types, and getting a credit builder loan, you can manage to build a credit score and get to the desired level.
Yes, it may take a while and might be challenging to manage your expenses. However, going through it, would make your spending habits under control and possibly never have to see your credit scores low again.
Use smart tactics to build a credit score.
