Building & Repairing Your Credit Score

Managing Credit & Building Credit > Building & Repairing Your Credit Score

Building Your Credit Score

For most lenders, having no credit is treated the same as having bad credit.

But it is easier to build credit than it is to fix bad credit.

Here are a few ways to both establish AND restore your credit score.

Get a Secured Credit Card

Many banks and credit unions will offer the option to apply for a secured credit card. Secured cards require you to deposit a small sum of money, which they use to secure your card.

This money remains untouched as you use and pay back your card balance. This history of payment will be reported to credit reporting bureaus, and help you establish credit worthiness.

Most secured cards will convert to unsecured cards after 6-12 months of timely payments.

Become an Authorized User

For young people who have parents with good credit, this is probably the simplest method to build their credit.

As an authorized user, the card's credit history is attached to your credit report, even though the primary cardholder is responsible for making the payments.

It isn't necessary to give the child a card of their own. As long as the card is in good standing, that history also benefits the child.

Get a Store or Gas Card

Many retailer and gas stations offer cards that can only be used at that business.

Be advised that the interest rates on these cards are usually extremely high, so only buy what you would with cash, and pay the entire balance off by the end of the month.

Apply For a Credit Builder Loan

Some banks offer this loan to help people build up their credit profile. The lender will deposit money you borrow into an account and you make payments on the money until it is paid back.

The principle works much like a secured credit card. As you repay the loan, that activity is reported and you build your credit score in the process.

Hopefully, this never applies to you.

But if it does, here are a few steps to fix your credit score if you ever encounter any setbacks.

Get a Copy of Your Credit Report

You'd be surprised at how many people don't know what is on their credit report simply because they've never requested a copy. As a consumer, you are entitled to one FREE report a year from each of the major credit bureaus.

Make sure to request and review yours. You can request at AnnualCreditReport.com.

Dispute Any Inaccurate Information

Credit reporting agencies get it wrong sometimes. If you find any inaccurate information that is negatively affecting your credit score, dispute it using the online process.

Removing inaccurate negative information is the fastest way to repair your credit score.

Report Rent and Utilities Payments

If you pay rent or utilities, you can request that these payments be reported to the credit bureaus. Positive lines are a huge benefit when in the process of digging out of a hole.

Create a Budget and Stick to It

For many people, bad credit is a result of bad habits.

One of the worst habits you can have is to operate without a monthly budget.

Create a budget, and stick to it when repairing your credit. A budget is a plan for your money, and will help you be more disciplined when managing your finances.

Repairing Your Credit Score