How To Build Credit The Safe Way
Most adults know the importance of credit. We know that without good or decent credit you can almost kiss many of your dreams good bye. You need credit to buy a home and cars you cannot afford to buy with cash. Every day young people are becoming adults and asking, “How do I build credit?” Unfortunately, they are asking some of the same people who struggle with credit and are getting bad advice. There are several ways to build credit. We are going to review a couple of ways that won’t leave you drowning in debt.
One of the easiest ways to build credit is to open a secured credit card. You start by putting down a cash deposit. If your deposit is $300, then your credit limit is $300. If you don’t make your payments, then the bank will take your deposit. Therefore, the odds of getting a approved for a secured credit card are pretty high. The work begins after you get your card and make your first purchase. If you have a $300 credit limit, but something for $100 and pay $25/month or $50/month until you pay off the balance. You might be able to pay off the whole balance but making the monthly payments on time shows that you are responsible and good at managing your credit. After all, payment history is 35% of your credit score.
Similar to a secured credit card is a secured loan. The premise is the same but the product is a little different. You put down a cash deposit and the bank gives you an installment loan for the amount of your deposit. If you deposit $300 and get a loan for six months, your monthly payment is going to be a little more than $50. Another advantage of using your own money is the interest rate is going to be lower. Since the risk of repayment is low even though you have little or no credit, the interest rate is also low. Remember, you have to make your payments on time to build your credit. Then you will start to see the rewards. The rewards of on time payments and paid off balances are increased credit scores, invitations to apply for unsecured loans, and increased credit limits. But you need to handle these rewards with responsibility. Remember, the goal is to build credit and not to become a slave to debt. It’s possible, and you can do it. All the best.Click here to buy a copy of my ebook: Money Management 101