Hey guys, I just thought in posting something that might be useful for you.
I am not sure about you guys here on Steemit, but I still hear and have people asking me or commenting with me on "how to build my credit from scratch" (usually young adults and teenagers) or "how to increase my credit score."
Credit to Google Images: credit report
Disclaimer: I am not a professional financial adviser, this post is based on my own experiences and opinion, so be responsible for your own actions, because I am not responsible for yours.
So, I broke down this post into two, just in case you do not need the first part and wants to skip through and go straight to "increase my credit score".
[Part 1: NO Credit at all]
If you tried to go and check for your credit score for the first time, especially in websites like creditkarma or your bank website, and it showed nothing or "insufficient data", you will have to set yourself in a position to somehow put your name out there in the system (credit unions' system like Equifax for example).
I know, it sucks: you have to have credit to build up credit, but you can't build up credit if you do not have any credit at all to get approved and build credit. Frustrating, just like "have to have experience to get a job, but do not have a job to build experience".
My wife recently had this issue about 3 months ago. Unfortunately, her parents never helped her with her credit, so after we got married I decided to help her out on this. We went to check her credit score and see if she would start at least on the "400 level" as usually they say where people starts at, but nothing showed up. It said that she did not have any data at all. So, how the heck she would apply for credit card or something if she did not have any credit score at all?!
First, I suggest you to create an account at creditkarma.com. Great free website to check your credit scores and details on it. Then, it should give you suggestions on which company you have the highest percentage of getting approved based on your current status. Note that I said highest percentage, but I did not say 100%. You can still very well get rejected and still get inquiries reported on your credit. So, just keep that in mind.
For my wife, it worked to get a credit card through citi bank, even though there was nothing showing in her credit report. Now, many beginner's credit card from most companies, they require a deposit on that "credit card", we did the $200 one. In which, basically we send them 200 bucks and they had it as a credit limit for the "credit card" (I am putting quotes in here because for me it is more like a debit card, but whatever, I understand they are trying to avoid risking their cash on newbies). Not sure if they will ever give that money back though, but it does not matter for us, because my wife needed to start somewhere, and unfortunately she go rejected by a couple other companies anyways.
Also, you could try to get a small loan and pay it back in time, but I doubt hard money lenders would approve 'credit newbies'.
Another way that may work for you is to have somebody co-sign a car, loan, credit card, or a phone bill , with you.
Depending on the credit score and details of the co-signer, you will have a higher probability in getting accepted. But read the terms and conditions carefully before you do it and talk with the person you are trying to get help from, make sure you guys make a solid plan on how to pay it off and etc. As that person may have his/her score messed up because of your lack of responsibilities and suffer further friendship/relationship consequences. Not cool, right?
I would suggest trying to get a phone bill completely in your name first, as they might require a deposit, but at least you will now start working on your credit by simply paying the bills on time consistently. Usually after 5 months, you already would have something to show on your credit report and maybe apply for a small credit card, like chase slate.
In addition, usually after about 1-3 months after approved in most of these items above, you should see a score and the details of it in the creditkarma, or whatever website or entity you are using to check your credit score.
Then you may check out the next steps to increase your score in the next Part II of this post.
[Part II: Increase my credit score]
If you already have a score, but you are somewhere between 610-680 and want to get higher, to be honest is very simple, but requires consistency, time, and being an adult when comes to bills.
First of all, if you signed up with creditkarma, you probably do not even need to read the rest of this post, as they break down all the reasons why your score currently states at this situation, and they give suggestions. No rocket science in there.
But, if you want to read on, then sure here is some basics:
1- PAY EVERY SINGLE BILL ON TIME! Lenders wants to see consistency with your responsibility on bills. Because they do not want you to miss out on their payments after they lend you something. So, hustle and pay your bills ON TIME or even earlier. Simple as that.
2- If you heard somebody tell you, "oh, to build your credit faster, make sure you do not pay your credit card principal all the time, pay only the minimum payment sometimes, in order to give interest to them [the bank owner of the credit card], because they need to make money." Sure, they need to make money, but you do not want to lose money! This is bull crap, do not listen to that advice, even some banks themselves give good advice that YOU SHOULD STAY UNDER 30% OF YOUR TOTAL CREDIT LIMIT. It's simple, your credit limit may be $1,000, you will only use up to $300, if you are at $290 out of the $1,000, simply use your normal hard cash to do the rest of your spends. My first credit card, I had only $500, but I only used for WEEKLY gasoline, so every single Friday when I got paid, I paid the card off. But, I never let it pass $150 out of the $500 limit on that credit card.
3- Credit history/age. Never close your accounts, unless it is extremely necessary. Your score is affected by how long you have your account. Usually after 3-5 years with that account actively open, will show that you are faithful and responsible with your bills and that you have self-control when it comes to where, who, what, which, when, to spend money on.
4- Try to have more than 5 accounts open. Your score increases when you have many accounts open. A good and healthy score, will have a diversity of accounts opened, like having credit cards, along with loans, and etc. I personally like credit cards over loans for many financial reasons, but for the sake of credit score building and showing what you got as a responsible adult, just get one or a couple that you can handle.
[Just please, do not get in crazy debt just because of some suggestions here in this post unless you are truly financially sound for it. Be smart about it]
5- Apply for a loan or credit card unless you really need and have to and know that you have a high probability of getting approved! Inquiries will mostly or always show when you apply somewhere that requires to look at your credit score. For example if you try to get approved for a house or car, these are hard inquiries. They may stay for more than 2 years, usually, on your credit score. Having 1-6 is not that bad, but as it accumulates you may drive your credit score down. So, do not exhaust your credit by trying to apply for everything you are being advertised on or by trying to get what you want all the time. Have minimum to no credit inquiries as much as possible on your report.
6- If you have bankruptcy, collections, tax issues, and etc. You will have to take care of that my friend. ASAP! Find out how you can solve the problem and get on it to be solved. Or if they are false by some form or shape, you got to report to the credit unions and prove to them and have it removed from your stuff. Equifax reports are usually the harsh ones, and they score pretty tough and show as many things possibly on your report, so I would definitely keep your eye on the reports from these folks. Most lenders use Equifax because of that too. Just a heads up.
Credit to Google Images: pay bills
I know that I just scratched the surface here, but I just wanted to provide a general guide, as there are many misconceptions and weird strategies on how to build up the credit score and what affect it or not. Again, I am no expert, but I did built my credit score quite fast in comparison to many people around me, and without having to sacrifice most of my hard earned money.
Now, above all else in this topic of credit building and loans, I really hope for you to utilize your credit to acquire what you need to acquire to thrive in the society, not to set yourself up for failure. I believe that your credit score may be a very good and powerful tool, especially for those that are not fortunate to have enough money to start on a business or buy something that will greatly help you to be successful. So, be responsible for your decisions and used this tool properly.
Google Images
LOL
Disclosure: I am not getting paid by Credit Karma, however, they certainly provide great free services for us to build our credit up. Of course, they make money by advertising and suggesting credit cards, loans, and etc. for you. But the cool thing is that they will only show to you what and which will have the highest probability in being approved for. This website certainly helped me a ton. Again, it is creditkarma.com
Although my answers may be limited by my limited knowledge in the subject, if you have any questions and need any suggestion I will be pleased to try to reply to your questions.
Let me know what you guys think!