Building credit if you don’t have a credit history can be difficult, and it could hold you back from getting a loan, credit card, or even an apartment. It’s a bit of the chicken or the egg problem, so how do you build credit? There are several tools to help you establish a credit history.

Credit Card

The best way to build credit is through a credit card. When you get your credit card, remember you don’t have to carry a balance. You can buy everything on your credit card and never pay interest on purchases. All you need to do is pay your credit card bill on time, in full every month. Speaking of purchases, if you can’t buy what you want with cash, don’t buy it with plastic — that’s how you will rack up debt. If you’re having challenges getting approved for a credit card, you could try some different options.

Secured Credit Card

A secured card is supported by a cash deposit you make upfront. This deposit is usually the same amount as your credit limit, so if you put down $200 as a deposit, you’ll start with a $200 limit on your credit card. This card is like a regular credit card except if you fail to make payments your cash deposit is used as collateral. When you close the account, you’ll get your deposit back.

Smart Choice Loan

A smart choice loan works like this; your money is held as collateral credit and becomes available once you pay down your loan balance. This is a great way to start to build credit without a credit card.

Credit for the Rent You Pay

There are rent reporting services out there that will take your bill and put it on your credit report. This will show a history of on-time payments. Only some credit scores take the payment into account, but it may just be enough to confirm your credit history to get a credit card.

How To Build Your Credit Score

It will take at least six months to build your credit score, and that’s with on-time payments. It is essential to pay your bills on time, and this goes beyond credit accounts. Make sure to take care of your other bills to prevent them from being sold to a collection agency as this will hurt your credit. Pay attention to your credit limit. Try to pay your balance off in full each month — but if you can’t accomplish that don’t let your balance pass 30% of your credit limit. Keep your credit card account open for as long as possible and avoid opening a bunch of accounts at once. If you have questions on how to plan for your financial future, DEXSTA is here to help. Stop by one of our branches, visit us online, or give us a call.