3 Strategies To Build Credit

There are many reasons why everyone should implement strategies to raise their credit.  For starters, a strong credit score makes it easier to get loan applications approved by banks, credit unions and other lenders. Those wishing to buy a home or make any other significant purchase will find that having a healthy credit record makes the process run more smoothly. Also, and arguably more importantly, when you improve your credit score, you also create the opportunity to access more attractive interest rates on your loans. This is because a higher credit score is a signal to the lenders that you are less likely to not repay the credit they extend to you. Therefore, because they perceive lending money to you as a lower risk proposition, lenders are willing to charge less for it. 

It’s clear why everyone should want to improve and build their credit. But how does one go about achieving this? This article addresses this specific question and outlines three simple, everyday strategies you can use to build credit quickly.

Use a Secured Credit Card

This is an option for the many people who are just starting to build their credit histories. If you fall under this category, you probably have found that your score isn’t high enough for you to even apply for a standard credit card. If so, you should consider applying for a secured credit card. These cards are designed for new borrowers looking to build their credit histories and require you to make an upfront cash deposit in order to gain access to the card. The amount of the deposit depends on the credit limit attached to the card. However, many credit suppliers ask for a minimum of $200. A secured credit card works in a similar manner to a regular credit card. You can use your card to make purchases up to your credit limit. The card has an interest rate attached to it and you’re expected to make at least the minimum repayment each month. The key difference is the security deposit, which acts as reassurance for the lender that you’ll likely repay your debts.

Take Advantage of Credit Card Promotions

The credit card business is fiercely competitive and as such the issuers are constantly offering promotions in an effort to attract new cardholders. This is the case not just for the large credit card issuers like Capital One and Chase Bank, but also for smaller community banks and credit unions. To illustrate the point, take Ontario Montclair School Employees Credit Union (OMSEFCU), which is a mid-sized credit union based in California. Right now the credit union is offering a Visa Platinum card with no annual fee, a 25-day grace period on purchases and annual percentage rates as low as 8.5%. Taking advantage of these promotions lowers how much having a credit card costs and in turn lowers the odds that you fall behind on your payment.

Ask for a Credit Limit Increase

Credit utilization is a measure of how much of your credit card authorized limit is currently utilized. For example, if your limit is $2,000 and you consistently have a $1,900 balance, that would be a very high credit utilization for the card. Importantly, the credit bureaus look at your credit utilization as one of the inputs in computing your credit score. Therefore, the higher the ratio is, the bigger the negative impact its likely to have on your credit score. Requesting a credit limit increase is a good strategy to lower your overall credit utilization which will have a positive impact on your credit score. 

There are many ways to improve and build your credit the three discussed in this article are easy and inexpensive methods that you can implement today.