Building up your credit, whether you’re coming back from bad credit or just trying to increase your score takes time, but it’s not impossible.
Why Does Good Credit Matter?
Oh, it matters. Good credit will make your life easier. If you’re buying a car, guess what? Your insurance premiums will be lower. The National Association of Insurance Commissioners (NAIC) states that “Insurance companies often use consumer credit information in determining if they will offer a consumer automobile or homeowners‘ insurance policy and how much that policy will cost.”
Planning on purchasing that house of your dreams soon? As a reward for good credit, you’ll receive lower interest rates and other discounted fees.
“Every facet of your financial life is impacted by the strength of your credit score”, as written in a recent CNBC.com article. From loan and mortgage applications, the article also says “a good credit score can also qualify you for the best introductory offers and rewards from credit cards with VIP perks like concert ticket presales, exclusive events, and even, in some cases, luxury concierge service.” Pretty cool, right?
If you’re reading this and freaking out because your credit score is less than ideal, you can turn things around and fix the health of your finances.
Pay Your Bills On Time
The most obvious way to build up credit is to pay your bills on time. Even if you can just pay the minimum, PAY YOUR BILLS ON TIME. If you miss one payment and you have a good payment history, a call to customer service can usually remove late fees and immediate payment over the phone will avoid any information sent to collections and the credit bureaus. You don’t want that!
Life gets busy, the dog ate your credit card bill, you have yet to use the bathroom today, blah, blah, blah. I get it. Some days, I wonder if life wouldn’t be better spent alone on an island with nothing to do.
Things happen and it’s easy to misplace or forget to pay a bill. While this is all true, there are ways to manage the bill-paying process without adding more things to your to-do-list. I wonder if there are to-do lists on that remote island aside from seeking shelter, finding food, and avoiding dangerous animals. Now that I think of it, I’ll stick to my current life and to-do-list.
Create a system that works for you. From the time you get your bills from the mailbox or see them in your online mailbox, that’s when the process should start.
- Have one specific place for unpaid bills to avoid searching all over the house.
- Print out online bills so you don’t forget to pay them.
- Dedicate one day a week to go through bills and stick with it.
- Immediately throw out junk mail so your large stack doesn’t seem so large.
Build Credit History
Many loans require a credit history and even if yours is nothing to celebrate, it’s still a history. “Credit cards are a very useful type of credit tool, and when used wisely, they can help you build your credit,” says Experian.com, one of three main credit bureaus. They can also be damaging to your credit if you don’t pay them on time so be careful.
Another option if you’re unable to get a credit card is what they call a secured credit card. There is a refundable money down requirement that is usually the limit on the card. Experian notes that you build credit with this card “by making responsible charges, keeping your balance low or at zero, and paying on time every month.”
The Glass is Half Filled
You may stink at paying credit card bills but if you rock at paying rent, you should be able to use that positive story, and you can. Experian was the first to include positive rental payment information. This means if your landlord thinks you are a very responsible renter who is never late on her rent, you can actually ask him/her to report your positive payment history. How great is that?
When you do your due diligence, get creative, and stay positive, there are ways to use the good to get rid of the bad.
Wow, You Look So Young Today Mom
Now may be a good time to start building up compliments to build up your credit. Why? If a family member is willing to help you along your financial health journey, you’re in serious luck. The retirement home you planned for your parents now became the guest room in your house.
Referred to as the Authorized User Strategy, when you become an authorized user on someone else’s credit card, you get to take advantage of their credit history. Let’s say your mom bought your compliments and in the mail is a credit card with your name on it.
What’s amazing about this opportunity is “many credit card issuers report authorized user accounts to the three credit reporting agencies,” says Forbes.com. Drum roll, please…. all of the sudden, your credit report shows your mom’s account as yours. Since your young-looking mom paid all her bills in full and on time over the past 20 years, your credit benefits. Moms rule!
Here’s where you need to be careful and respectful. You now have access to this account with your shiny new card, which means the ability to accrue charges which will increase mom’s monthly bill. My advice, let her keep your card.
There is no need to charge anything as it’s not a free invitation to buy a new wardrobe. Don’t take advantage of your loved ones who are willing to risk their clean credit history to clean up yours.
Additionally, there are specific loans you can take out like a credit-builder loan, and even just viewing and understanding your credit report can put you on the right path to building your credit.
You’re not the only person in the world trying to build credit and there are many options available and support to help you. Be smart with your spending and responsible with your payments to build up your credit. Oh, and remember those compliments…they go a long way.
Here’s to the Wellness of Your Wallet!