Cash deficiency shouldn’t stop you from meeting your financial needs and goals. You can easily get a loan and repay it within the agreed timeframe with the lender as a direct solution to your financial woes.
Unfortunately, the loan you can get depends on your credit (borrowing capacity). Several things contribute to your credit profile, such as payment history and existing debt. If managed properly, credit can be used to avail yourself of favorable loan terms and a better financial standing.
Suppose you want a loan but can’t get one due to your subpar credit. It’s possible to build your credit; here’s how to do it:
1. Get A CreditBuilder Loan
Creditbuilder loans work if you don’t have a credit history that lenders can rely on to gauge your repayment capabilities. With these loans, you’ll get a loan without lenders checking your credit report.
A creditbuilder loan provider will give you the loan. However, you won’tget the money right away. The money will remain in an account, and you first must pay for the loan to access the cash. Most lenders will require a monthly payment, a record of which will be reflected under your credit report’s payment history section and boost it.
You shouldn’t worry about where to get the right loan for your needs. Credit-builder loan providers like CreditStrong have different accounts from which you can choose.
2. Pay Bills On Time
Your payment history influences your credit score. Therefore, pay your bills on time to improve your score. These bills touch on both rent and utility bills like electricity and water.
For rent, there are rent-reporting services you can use to ensure your rent payments reflect on your credit profile. Here, you should ask your landlord if they use them. If they don’t, you can find a rent reporting service that allows tenants to report their rent payment history. However, with the latter, you’ll pay a subscription fee, often monthly.
As you use rent reporting services, please find out the credit bureaus they report to. You want it to be with a bureau most banks or lenders in your region use to check your credit history. It’s the only way your efforts will reap results.
3. Become An Authorized User Of A Credit Card
Becoming an authorized user of another individual’s credit card can help you boost your credit standing. A credit card authorized user relies on the credit of a bank account holder. Keep in mind that the authorized user isn’t the owner of the bank account.
Becoming an authorized user helps you because the owner’s credit status will reflect on yours too. If they pay the debt on time and it increases their credit score by two points, the same will happen to you. The efforts of the account owner are what will help your case. However, the worse can happen if late payments are made. To fully take advantage of becoming an authorized user, make sure that you communicate with the original card owner.
To become an authorized credit card user, find a partner, whether family or a friend. It’s important to confirm that they have a good standing regarding finances and credit. Propose the idea to them, and if they agree, they’ll add you as a credit card user to their account. Depending on your agreement, the account holder can authorize you to make specific transactions from their bank account.
4. Don’t Borrow Loan AmountsThat You May Have A Hard Time Paying Back
One of the mistakes most loaners make is borrowing way beyond their means.
Overborrowing increases the chances of you not clearing your debt on time. Also, you might find yourself taking more loans to pay existing debt. This habit negatively impacts your credit since lenders will rely on your payment history and the number of existing loans to determine whether or not they’ll lend you money. In such a case, you can be flagged as a high-risk client, lowering your credit score.
5. Pay Off Existing DebtAnd Other Financial Obligations On Time
As previously stated, lenders will check the existence of debts and other pending financial obligations before giving you a loan. The more unpaid debt you have, the poorer your credit will look. You can still get a loan alright, but you’re less likely to get financial assistance with favorable terms.
If you have loans currently, you can easily pay them off with proper planning. Consider first paying off high-interest debt, followed by low-interest ones. As you do this, you don’t have to put the low-interest debt aside completely until you finish those that come with high interest. You can make small payments for the low-interest ones and huge ones for high-interest ones. Doing so decreases the time you’ll take to finish off your debt, which is a plus for your credit report.
Conclusion
Having a good credit profile is important for you have no idea when you’ll need financial assistance. It’ll come in handy by increasing the chances of you getting the amount you need at ease with favorable payment terms and rates.
The post above has shown that all hope isn’t lost if you have a bad credit profile. It has given tips on building a good credit profile. Consider implementing this guide for your benefit.
