How to Build Credit if You Have None
Your Credit Score shows banks how responsible you are in paying back the money you owe. Establishing good credit is one of the most important things you can do in your life because having good credit will save you thousands of dollars over your lifetime.
Today’s guest specializes in helping people rebuild their credit so they can get qualified for major purchases. Brittneye Williams from MyCreditDreams.com is here to share how we can build our credit so we can affordably finance big purchases for the future.
Like I talked about in a previous podcast (episode 10 link) I was part of the 10% of adults that is “Credit invisible” meaning I had no trackable credit history. In the past 4 years, I’ve learned valuable lessons so I’ll never be denied for anything I could afford.
You’ll Learn
- What Credit is and why every adult needs it
- The difference between your credit score and credit report
- Tips for building credit if you don’t have any
How Your Credit Score is Calculated
Housing – Fico 2 Score
Credit Cards & Vehicles– Fico 8 Score
The Difference Between a Credit Score & Credit Report
Credit Score: Your credit score is a three-digit number that relates to how likely you are to repay debt. Banks and lenders use it to decide whether they’ll approve you for a credit card or loan.
Credit Report: your credit report is a detailed report of an individual’s credit history prepared by a credit bureau. Credit bureaus collect information and create credit reports based on that information, and lenders use the reports along with other details to determine loan applicants’ creditworthiness.
Strategies to Building Credit
- Get a $1000 CD through a bank.
A CD stands for Certificate of Deposit. You loan the bank money for a set period of time. When that time is up you get your money back plus interest.
Use the CD as collateral for a $1000 loan. Pay the loan back over 6 months on time to establish a history of on-time payments.
2. Ask parents to add you as an authorized user only if they have good credit history. You will inherit their length of credit history along with their credit limit. Warning: if they miss payments you’ll inherit that too and it will bring your score down also.
Get a Secured Credit Card
Capital 1 will give a card to anyone looking to start building credit. Sometimes you may need put down money as collateral against the card. If you don’t pay off the card, they have the money to pay it off with.
Here are some other tips used to build credit using credit cards.
Other Tips From the Show
- If you miss a credit card payment it won’t show up on your credit report as long as it’s paid off within 29 days after the due date. However, you’ll still be charged interest and a missed payment fee.
- Get your utilization rate below 30%. A high utilization rate makes banks feel as if you’re spending more money than you have.
- Always budget off of one income (for couples)
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Here is a list of resources mentioned in this episode:
How to build credit using credit cards
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