In today’s day and age there is simply no getting around the fact that you need credit in order to make some of the more significant purchases in your life. It’s also quite handy to have, to be sure.
Whether it’s to purchase a home, and automobile or any other type of “big ticket” items, lenders look at your credit score before they look at anything else (unless of course you have a huge amount of cash) (which you probably don’t). What that means is that, if you don’t have a credit history, you’ll need to build one so that those creditors have something to look at, and you need to of course get it as high as possible (and keep it there) in order to get great rates on interest.
Many consumers believe that the only way to do this is by getting a credit card, but that’s definitely not the case. Below are a number of alternatives that don’t include getting a credit card but definitely will help you to build a credit history and boost your credit score. Enjoy.
1) Talk to service providers and asking them to report your account activity to the top three major credit bureaus, TransUnion, Experian and Equifax. You can do this with any company that sends you a recurring bill every month, like you cell phone service provider, your apartment complex or even a utility provider like the electric or gas company. One caveat is that you only want to do this if you have a sterling history of payments with that company because, obviously, if you don’t they won’t give you a good report.
2) Apply for a small, personal loan with your local credit union. Your local credit union can give you a small personal loan at a relatively low interest rate (usually lower than traditional banks). Take one out, pay it off on time and, when you’re done, voilà, you have a credit history.
3) Ask someone in your family to allow you to become an authorized user on their credit card. If a family member that you trust (and who trusts you in return) will allow you to become an authorized user on their credit card, and they have a strong credit history, their excellent credit profile will help you to get some credit traction of your own. Of course the opposite is true as well so, when choosing who to ask, make sure that they have excellent credit already or the “help” that you want will end up turning into a “hurt” instead.
4) Apply for a federal student loan (if you’re a student, of course). As a student, there’s no credit check required when you get a federal student loan and, since they’re installment loans, it can help increase your credit score. Do yourself a very big favor and deposit that money into an account and leave it there so that, when it needs to be repaid, you actually have the money to do so. (You’ll also get some money in interest as well.)
5) Take out an installment loan. When you get an installment loan and pay it back over an extended period of time, you show creditors that you have the responsibility needed to handle credit. While installment loans and other loans of this type only make up 10% of your actual credit score, for someone who has a limited amount of credit history they can have a bigger potential to boost your credit score.
6) Report your payment history to an alternative credit bureau. Sure, the “Big 3” carry the most potency, but there are other credit bureaus out there as well (dozens of them actually) that can help you build your credit. If you want to find out more, research the Payment Reporting Builds Credit (PRBC) online.