Building credit can be confusing. How do you do it? What’s the best method? Is there more than one way? Here are a few methods that could help you build or repair your credit.
Though their intended purpose is to provide funding for those who need it, personal loans can actually boost your credit score. By taking out a loan and making on time monthly payments, your credit score can actually go up, showing that you’re a trustworthy borrower. It should be noted that, if you take out a personal loan for debt consolidation, your credit score may go down at first but, as you make on time payments, it will go back up.
If you’re just beginning your journey into credit building, a secured credit card is a great way to start. When you apply for a secured credit card, you provide a cash deposit as collateral. You’ll get your deposit back once you close the account. You can use a secured credit card the same way you would any other credit card — to buy things and to make payments. You can raise your credit score by making on-time payments.
Another way to build credit is to become a cosigner on a friend’s or family member’s loan or credit card. With this type of arrangement, both signers are responsible for making timely payments on said loan or credit card. If the payments are late, both credit scores could take a hit. On the other hand, if the payments are on time, both signers could benefit from a credit boost. So it’s important to be sure someone makes the payments on each of your accounts every month.