How To Build Your Credit Score?
Nowadays, credit score occupies a separate niche that affects all areas of life. Therefore, experts advise taking the fact of creating credit history with the utmost seriousness, adhering to the saying that it is necessary to “preserve the honor of the youth”. We will tell you how to build a credit history and not spoil it.
Why do I need a credit history?
Credit history is systematized information regarding the interaction of the borrower with the financial system of the USA. This document reflects the facts of the borrower’s fulfillment of credit obligations, with a detailed analysis of the amounts, terms, delays and debts, claims from the judicial system:
- A good credit score creates a positive business reputation for its owner. Banks give loans to such customers without fear of the risk of default;
- Bad credit score can create problems for the client in the lend-ing area;
- Lack of credit history is considered the most unfavorable factor because the bank is unable to assess the client.
Who has access to credit history?
First of all, the borrower has full access to the full credit history. But when applying to a credit institution for financial assistance, the borrower can provide written consent to provide the bank with data from the Credit Bureau.
Who else has access to the credit history database (with the permission of the borrower)?
- insurance companies that use the information to assess risks in claims settlement;
- employers who form an objective characteristic of a potential employee.
When executing court decisions, representatives of state bodies, including bailiffs, have the right to request individual sections from the credit dossier.
Reasons for the lack of credit history
A credit history begins from the moment when a specific borrower signs a consent agreement so that:
- the creditor bank transfers all information about his/her to the database of the credit bureau;
- the client has the opportunity to send inquiries and receive up-to-date credit history from the credit history bureau (if necessary).
If a person has never applied to credit institutions for lending services, he/she will lack credit history due to a lack of necessary data and events.
How to start a credit history?
Something is always done for the first time, including credit history. It is important not to fuss and send applications to all banks at the same time.
How to start a credit history? You need to start small, but there are a lot of options.
Purchase of goods by installments
Buy a new bicycle for your family, for example, by ordering an installment plan from a bank representative in a retail network. And slowly pay off the debt within the period specified in the loan agreement.
There is no need to be in a hurry when creating a credit history. Take some time.
Small payday loans
Microfinance companies work with clients who have no credit score, insuring risks with high interest rates. Apply for a short-term payday loan online, return it at a grace period – save on interest and start a credit history.
In order to avoid delays that threaten a damaged credit score and fines, you should:
- carefully read the terms of the agreement;
- draw up a payment schedule.
Once you repay the loan, request from an official certificate confirming the absence of claims from the lender.
You can increase the degree of trust by applying for a credit card issued by a bank that you want to cooperate with. The presence of credit history with this type of lending is not required, as well as confirmation of solvency.
In order not to get into a negative situation, you should observe two rules: use the card funds in a non-cash way and return the money spent on time.
Personal loan in a bank
When planning to buy an apartment on a mortgage, build a positive reputation by first taking a small fast loan for personal needs. Bear in mind that a client without a credit history will be approved for a loan, perhaps not on the most favorable terms. But if you do duties responsibly, you can be sure of increasing your status.
The availability of collateral in the form of an expensive property will allow the bank to be confident in the timely repayment of the debt. If you get a loan secured by a car or an apartment, the main thing is to make payments accurately and repay the debt on time. In this case, the item will remain the property of the owner and the score will improve.
A secured personal loan is usually issued upon presentation of one document – a passport. The decision on the application is provided within a few minutes.
Special banking programs
Often, banks develop special programs to attract new customers. For example, some of them have a program called “Credit without credit history”, the conditions of which correspond to the standard ones.
The entire registration procedure takes place online, you must be an adult citizen of the U.S. and have a minimum income.
If all banks refuse to help, then there is no other way how to earn credit score. You need to be patient and participate in a special program aimed at improving your credit history.
Bear in mind that the program is designed not for an easy loan, but above all for the gradual creation of good credit score.
How to build a good credit history from scratch?
You can start a good credit history at any time, but it is better if this moment coincides with favorable life circumstances:
- stable work;
- good earnings;
- the presence of a bank account;
- an open deposit.
In this case, the credit organization will approve the loan even if you have no credit history. The further task is to fulfill their obligations: to repay the debt on time and in the required amount.
Before starting a credit history, you should first send a request to the Credit Bureau to make sure that you are really starting from scratch.
What can damage a credit score?
You can ruin your credit history by unscrupulous fulfillment of your credit obligations. It is important to understand that banks transmit information to the Credit Bureau every 10 days. If the borrower for some reason is late with the payment within this period, then the delay will not be reflected in the credit history.
Late payment of debts can severely damage your credit score. Failure to pay the loan within 90 days lowers the borrower’s rating to negative numbers. The borrower will create a bad credit history with one negative fact, despite the fact that he/she is a wealthy person who regularly pays off several more large loans.
It is recommended to request a credit history every three months for monitoring purposes. After all, banks may make technical mistakes or fraudsters may take a loan in your name.
Credit history is a document that allows you not only to apply for financial assistance to banks but also creates a reputation in the professional field. The conclusion is clear – a credit history must be created and maintained in perfect condition throughout life. Only in this case can you count on the favor of the system.
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