Get yourself a secured credit card
Secured credit cards are often the go-to way for people with bad credit or little credit history to bolster their credit score.
Many will run a credit score to evaluate you for certain aspects of the card, but some of the best credit cards for people with bad credit don’t do a credit check or allow you to do a soft credit check.
The flipside of this is that you put down a deposit when you open a secured credit card account, often to the sum of your credit limit to reduce the risk taken on by the lender.
The idea here is that you put down the deposit to then use the secured credit card.
By using the secured credit card, paying bills promptly and on time, and using it responsibly, you can build up your credit score.
Once you’ve built it up enough, you’ll be able to claim your deposit back and then apply for an unsecured credit card.
Secured credit cards often require between $200 and $300 as the deposit, but it’s a tried and trusted method of improving your credit score.
Become an authorized user on someone else’s credit card
While it’s not a fully-fledged way of adding credit history while building your creditworthiness, becoming an authorized user on someone else’s credit card can help to give your credit rating a boost.
Provided that the primary account holder is sensible, has always remained on top of their payments, and the account’s utilization rate is low, their good record with you on the account can reflect favorably on your credit score.
However, it must be said that even one missed payment can hurt your score, so while the responsibility to pay remains with the primary account holder, as an authorized user, you’ll have a lot of stake in making sure that payments are made in good time.
Consider a credit-builder loan
Most people know about secured credit cards and unsecured credit cards being able to boost your credit score, but few know exactly how a credit-builder loan works.
It’s a rather savvy plan that helps those without credit history or bad credit to showcase their ability to be trustworthy financially, raising creditworthiness.
The general process is that the lender puts the amount that you wish to loan into a savings account for you, and that you make fixed payments over a set number of months.
Once you’ve completed the fixed payments over the timeframe, the lender will return the money to you from the savings account – which may also include interest paid – so the credit-builder loan works as a way to increase credit and save money.
By far the most important factor of the credit-builder loans is making your payments on time to conclude the loan in the agreed-upon timeframe.
The lender will report your repayments to major credit bureaus so this process will impact your credit score.
If you’re on a tight budget, you can still utilize the credit-builder loan, but be sure to lend a smaller amount – the amount loaned doesn’t matter, but the timely payments do.
Paying bills? Get some credit for it!
Many people think that paying any of their bills on time influences their credit score but, in some cases, it does not.
But there are some rent-reporting and bill-reporting services that record your timely payments to your credit score.
Rental Kharma and Rent Track will use a bill that you’re paying into your credit report to build up your repayment history, and Experian Boost – only for use with the Experian credit report – will reflect your phone and utility bill payments.
Keep it simple: pay your bills on time
It’s the simplest formula to follow and has already been uttered several times above, but if you want to build up your credit score, the best way to do so is to pay your bills on time.
As lenders looking at credit scores are assessing the risk of you paying them back, having a very healthy credit history of paying your bills on time every month is often the deciding factor.
None of the methods above work to build up your credit score unless you make repayments on time and to the amount requested.
As you can see, regardless of if you’re devoid of credit history, have a very short credit history, or have a bad credit score, there are many ways in which you can raise your credit score.
The key to it all, however, is to use within your means and always repay on time.