How to you get great credit and get approved for a car loan ?
This article will be useful to you whether you you’re looking to build new credit or improve your current score.
Useful tips on getting started here !
Building great credit is Really easy!
- Apply for a credit card (if you don’t already have one)
- Use it regularly
- Pay every month (minimum or in full)
- Repeat steps 2 and 3
- Request an increase
How do you get credit when you have no credit !?
That’s the big question isn’t it. There’s no simple answer because one bank may decide to decline your request, saying ‘you have no credit history’. So it’s like a catch 22 !? More on this below
Additionally, building great credit takes time. The banks and credit card companies partly base their decisions on scores (Fico, BNI, Buro), the way you use and repay credit plus many other factors. There are many factors, but in this blog I’m just skimming the surface.
1. Apply for a credit card
It’s recommended to start by applying for a credit card with your regular bank, the one you use for everyday banking.
Why ? Because they see flow of money in your checking/savings account plus your spending habits. Keep in mind, there’s no guarantee they will approve you. You may consider changing banks if this is the case.
Keep your head up because one company out there will take the leap and issue you a $500 credit limit (which is usually the baseline).
2. Use it regularly
Once you have the credit card, then start using it. As a starting point, you can set up automatic payments for your cell phone providers or other bills that accept credit cards. Additionally, use it in stores, online, you’ll get the hang of it 😉
3. Pay it every month
This part is very important, you need to pay the credit card each month. The biggest part of your credit score will be determine here, so you want to make sure to make a payment. It doesn’t matter if you the minimum due or the full amount, as long as you make a payment. However, the difference between good and great credit lies here.
Paying the minimum balance on your credit card builds good credit
Paying the full balance every month helps build Great credit
*Any recent ‘late payments’ showing on your credit bureau will affect chances of future credit or any limit increases.
*Pro tip: The easiest thing to forget paying is a cell phone bill, which can also affect your credit rating. To avoid this, why not set up automatic bill payments with your credit card. Just don’t forget to pay your credit card in this case 😉
4. Repeat steps 2 and 3
Just having a credit card alone doesn’t help you build good / great credit because the banks and financial institutions will see that you have an account but that it’s also inactive. Just like exercise, there needs to be repetition !
This is why I suggested paying off your cell phone bill with your credit card, because any positive activity helps (as small as it may be).
5. Request new credit or a limit increase
Every now and again, it’s good to request new credit or a limit increase, especially if your limit is as low as $500-$1000.
Why ? Because the credit bureau sees new credit activity plus it may help reduce the debt ratio. Consider this:
- Imagine that you have a $300 balance on your $500 limit. This represents a 60% debt ratio on your credit bureau, which is huge
- Alternatively, imagine a $300 balance on a $1,500 limit. That drops the debt ratio to 20% !
Thanks for reading
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