RETAIL CARDS: If you shop at a particular store often, consider applying for the in-house credit card. “Retail credit cards are normally pretty easy to get, but they come with high interest rates so it’s very important they are paid off every month,” says Heather Townsend, a certified financial planner at Townsend Financial in Scottsdale, Arizona. Also, the credit limits tend to be low, so remember the guideline not to use more than 30%. CREDIT-BUILDER LOAN: As its name suggests, this loan — typically offered by credit unions — is designed to help you build credit. You apply for a loan, but the money is deposited into a savings account that you can’t touch until the loan is paid off. The lender reports your monthly payments to the credit bureaus. Repay the loan as agreed and you kill two birds with one stone: build a credit history and get a lump sum of money at the end.
BEEF UP YOUR CREDIT HISTORY
Having more positive information on your credit reports can help you build credit. AUTHORIZED USER: If you have family members or friends with good credit, ask them to add you as an authorized user on a credit card. Check that the card issuer reports authorized user accounts to the credit bureaus. This adds their long credit history to your credit reports, which can help your score, but you are not responsible for making payments. There’s no rule of thumb for when you should stop being an authorized user, Townsend says. If you are brand new to credit, she suggests staying on as a user for at least five years, assuming you also manage other credit or loans responsibly in that time. RENT REPORTING: “Ask your landlord if they report your payments to credit bureaus,” says Eric Roberge, a certified financial planner and founder of Beyond Your Hammock in Boston.
Many landlords do not, so Roberge suggests using rent-reporting services, which charge a fee to report your rent payments to the credit bureaus.
Don’t feel like you have to take out a lot of credit at once . . .
KEEP IT SIMPLE
Pick a credit-building tool and stick to good habits: pay on time and keep balances low. “Don’t feel like you have to take out a lot of new credit at once, or get different types of credit just for the sake of building your score,” Roberge says. “Using just one card will help you build a positive credit history without overwhelming you.”
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