Whether you’re recovering after bankruptcy, considering buying a home soon, or simply trying to get a strong start with your finances as a young adult, it’s a good idea to consider how you can build your personal credit. Many people open up a credit card account and make sure to use their credit card every month—even if only for a small purchase or two. There are, however, others ways that can boost your credit, and if you are reluctant to make the jump to an unsecured credit card, you should definitely consider them. Here are some unexpected ways that you can boost your credit.
Become an authorized user on a credit card.
One easy way to boost your credit rating without opening up your own credit card is to ask a family member to add you as an authorized user on one of their existing credit cards. You might even agree not to use the card. This can get some available credit and payment history added to your credit report. Of course, you’ll want to make sure that the family member you ask has a strong credit history and will continue to make on-time payments to their credit card company.
Consider getting a secured credit card.
Most credit cards are unsecured, meaning they don’t require a deposit as collateral in case cardholders can’t pay off their debt. Secured credit cards, meanwhile, are actually designed for people with bad credit or no credit. With a secured credit card, you must first make a deposit that is typically equal to the card’s credit limit. Once that initial deposit is paid, a secured credit card works just like an unsecured one. So if you don’t trust yourself with access to credit, and you have some extra money for a deposit, a secured credit card might be a good option for you.
Make student loan payments on time.
Yep—making those dreaded student loan payments on time counts towards your credit history. It’s best to start paying the interest on your loans before you even graduate, but at the very least, you should start putting money away for when that 6 to 12-month grace period after graduation ends. Once you begin making payments, it’s a good idea to turn on automatic payments so that you never have any late or missed payments.
Make car payments on time.
Student loans are not the only type of loan that affects your credit history. In fact, most loans will have an impact. If you are considering buying a car with cash, consider instead making a large down payment and taking out a loan for the rest, then paying back that loan diligently. You will have to pay some extra in interest, but if you aren’t building credit with a credit card, then this may be in your best financial interest in the long run.
Try a credit-builder loan.
Some banks and credit unions offer credit-builder loans to help individuals who are working to build or rebuild credit. With a credit-builder loan, you can borrow a small amount—of, say, $1,000 or less—and make payments for 12 to 24 months. Your payments will typically be deposited into an interest-bearing CD or savings account. As an added bonus, these loans tend to have relatively low-interest rates since they are, after all, designed to help individuals build their credit. When applying for a credit-builder loan, double-check that your on-time payments will be reported to at least one of the three major credit reporting agencies.
Pay your rent on time.
Did you know that as of recently, some apartment complexes host rent-reporting services where you can pay a little extra every month to have your rent payments reported to credit bureaus? This can help individuals who have “thin” credit (not enough data on file to be assigned a credit score) but who have a strong personal history of paying rent on time. There is, however, a catch to this: many different credit scores can be calculated from the information in on your credit reports, but usually credit card issuers and lenders to pull those scores that consider rent payments.
Maurine Anderson originally hails from Washington, DC, but is now enjoying life out west in Salt Lake City. She is a professional writer and blogger who in her free time loves to create new cake recipes, travel, and practice her hand at photography. She tends to geek out over linguistics, cats, and all things Scandinavia.