It’s possible to build a good credit card history and a strong credit score without accumulating credit card debt. Whether you’re planning to apply for a mortgage, buy a car or rent an apartment, your credit score is the major determinant; a strong credit score can get you approved as quickly as possible.
The most critical determining factor is paying your credit card bills on time every month as it boosts your payment history. While credit cards help your credit, it often leads to uncontrolled spending. Here are a few options to help you build your credit score without adding to your debt:
Pay Your Bills On Time
Don’t allow your bills to go past the due date, whether it’s your student loan bill, electric bill or cable bill. It achieves the same result as paying your credit card bills on time. If you’re likely to forget, set up reminders when it’s close to the due date so you don’t miss any payments. Alternatively, use the auto-pay feature to authorize your bank or biller to automatically deduct the funds from your account.
Become An Authorized User
Credit card companies usually give the option of adding another person as an authorized user on an account. This person can make charges, report a stolen or lost card and make payments on the account.
An advantage is that you’re not financially responsible for the account and the credit card record payment shows up on your credit report. You’re basically using someone else’s good credit to build your own credit score.
Get One Credit Card and Use It
Don’t apply for many credit cards at once. You must use your credit card accounts to build a good score. There are also lots of credit cards out there which come with apps which help track your spending and make financial projections, making sure you are always on top of your finances.
Report Your Timely Rent Payments
If you’re in the habit of paying your rent on time, use a rent-reporting service to add it to your credit score. The trick is to show a consistent pattern of paying bills and financial responsibility.
Use An Alternative Credit Score
The problem with a first-time credit score is that you need credit. An alternative credit scoring models track your utilities, rent, phone and other recurring bills. It is limited but accepted by some companies and helps you build a traditional credit score.
Check For Errors In Your Credit Report
An FTC study noted that 25% of credit reports have errors, which could lead to lower credit scores. Use a credit repair service or do it yourself to increase your credit score.
Manage Your Student Loans
Student loans can positively influence your scores if you make payments on time. For struggling individuals, consider an income-based payment plan or ask your private lender about repayment options.
The school of thought that says the only way to build a good credit score is to accumulate debt and make payments on time is wrong. No matter your current credit score, you can always improve it without accumulating more debt. Keep up with recurring bills, make payments on time and use a credit card but keep the utilization low.
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