subject: How do I build my credit if I have no credit? [print this page] Buying a dream home, utilizing a refinance offer or applying for a vehicle loan is a long row to hoe with a credit score categorized below the standard impeccable level. For a victim of a recent bankruptcy, a newbie in the credit world or a troubled user of the plastic, below are some guidelines to rectify the obstacles of a zero or lower credit score.
It is a evident that lenders of a mortgage, car loan or other financial obligations scan through the credit history whenever an appeal is put forth by the borrower. A bad credit report is an indication of the financial instability of the borrower and his/her inability to repay any future debts. A thorough knowledge of the yins and yangs of the credit world serves as a knight in shining armor in such cases of dilemma.
Many credit companies opine on minimum age but an early start preferably the college years is a perfect rule of thumb for an entrant. Loans borrowed by students cosigned with a parent or spouse is advantageous over borrowing one without a cosigner since the repaid debt is guaranteed to boost the credit score of the latter.
The risk in this case is trivial to both parties due to the fact that the co-signer has taken some of the burden off the borrower's shoulder thus reassuring the lender.
Applying for a credit card and managing in compliance with the ground rules adds up to the positive credit scores, while having multiple cards and no time to peek into the monthly statements will only lower the score thus complicating the matter. Also essential is that the charges incurred on the credit card due to the purchases made needs to be repaid fully ahead of the due date, another way to demonstrate to the credit agency the borrower's financial responsibility.
A tricky way to improve the credit score is to get a credit line to a maximum amount but keep the expenditure to a bare minimum. The general convention is to maintain the expense within 20% of the credit limit. A single late payment that results in late fees is not only a salt in a wound while repayment but would throw a spanner in the credit works after all the effort and patience.
Another important factor to jot down is opening an account with a reliable and convenient bank to request a secured credit card. Doing so is the surest way to win back the lender's confidence because the loan lent is payable from the initial deposit held in the account. Never confuse a secured card with a debit card as the debit card is merely for withdrawal and is not reportable to the credit bureaus. While the same principle of co-signer holds good here, repaying the loan can be done in installments without affecting the already accumulating scores.
Last but not least, a periodical quick examination on the credit scores obtained from credit monitoring services will ensure that the borrower is making headway.
