Building good credit isn’t a sprint, but a long hard slog that never really stops. It takes attention and time and patience – none of which are attributes we tend to carry in abundance when it comes to our credit reports and credit scores. If you’re reading this you’ve already taken the first steps toward attaining your goal and that alone is something to be proud of.
As your working on getting your score up to you need or want it to be, there are several things you can do to proactively help increase your score. With all the different kinds of credit out there, the following are those proven to help increase your credit score while also building a positive credit history:
There are essentially two different kinds of credit accounts: Revolving and Installment. An Installment account is any kind of loan (like an auto loan) that has a fixed monthly payment for a fixed amount of time. A Revolving credit account is a line of credit that carries over a balance month to month with a minimum payment due. They also don’t close once the balance reaches zero. The simplest example is a credit card from a bank or even a retail store specific credit card like a Sears charge or a Kohl’s card.
Revolving credit – as long as you pay on or before the due date every month – can have the fastest, most positive effect on your credit score because they report every month to the credit bureaus. Top of the list is an unsecured credit card. The longer the account is open with positive history the more beneficial it will be to your credit score. Unfortunately we can’t give you a specific number because dozens of differing factors go into determining every individual’s credit score.
If you’re someone who has never had a credit card you might right into problems getting approved for your own card. If you find this to be the case, don’t worry. There are options available other than having your own unsecured credit card. For example, being made an authorized user on a close family member’s account is an excellent place to start. Parents or a significant other can make you an authorized user on their credit card so you receive the benefits of that positive credit history.
Another option is obtain a secured credit card. It’s a simple concept: an upfront deposit you make backs the secured credit card. That deposit is your credit limit (usually). The card is used like any other credit card. You use it to make everyday purchases, make payments before the due date, and are charged interest if you fail to pay off the balance every month. That cash deposit you made is their collateral if you fail to make your payments. When the account is closed you then get your deposit back. Don’t keep these kinds of accounts indefinitely, a secured credit card is only meant to be used so can qualify for an unsecured credit card with much better benefits.