Are you one of those people who has never applied for a loan or credit card? If the answer is yes, you most likely don’t have a credit history. We can assist you if you’re just beginning your credit journey and need advice on how to grow it properly.
A high credit score is necessary to be approved for a variety of credit cards and loans quickly. However, you must establish credit in the appropriate method to open the line of credit. Here are a few pointers to help you establish a solid credit history right away.
Top 7 Strategies for Increasing Credit Scores
- Apply for a Credit Card First
People without credit histories are generally reluctant to receive loans from banks and credit card firms. This is because they can only determine whether you will return the loan amount on time or not based on your credit history. Therefore, you must use credit in order to establish credit.
The most crucial query at this point is: How can you establish credit if no lenders are ready to extend you credit? Fortunately, there are a few strategies you can employ to solve this problem.
A credit card is one of the most popular financial instruments that can assist you in starting your credit journey. The simplest and most frequent technique to increase your credit score on your own is to apply for a credit card. Both secured and unsecured credit cards are available for application.
- Credit Card Secures
If lenders aren’t interested in your application for an unsecured credit card, you can also apply for a secured credit card. People who don’t have a job and have never had credit before must apply right immediately for a secured credit card because they aren’t qualified for an unsecured one. Secured credit cards are easy to obtain for people with bad credit because they are issued in exchange for a deposit or other kind of security. The security is often in the form of a fixed deposit with most banks.
- Abstain from requesting many credit cards at once.
Your credit score is impacted each time you apply for a credit card. Avoid applying for multiple credit cards at once to avoid giving the impression that you are credit-hungry to lenders. Additionally, it serves no purpose to lower the credit score you are working so hard to raise. Use the credit card you already must show that you can manage credit effectively rather than applying for credit cards at several different banks. Always pay the bill in full and on schedule and keep your balance low.
- Become an authorised user
Using an unsecured credit card is yet another strategy to raise your credit score. People who have never had credit before cannot obtain an unsecured credit card, as was already mentioned in the paragraph above. They can still improve their credit score, though, by obtaining permission to use someone else’s credit card. You can ask your spouse or any other family member who uses a credit card to add you as an authorised user. You must use credit carefully because you are still getting used to it, especially if you are an authorised user because even one mistake could negatively affect the credit score of the person whose credit card you are using.
- Monitor Credit Utilisation Ratio
There is a credit limit on your credit card (the maximum amount that credit card lenders allow borrowers to spend). Credit agencies consider the credit utilisation ratio when calculating your credit score once you start using a credit card. The ratio of your credit limit to the total amount you have spent on credit cards is often referred to as your balance-to-limit ratio.
It’s crucial to keep an eye on this ratio since it reveals how well you handle the credit you have access to. Try to keep your credit utilisation ratio between 30% and 40% of your overall credit limit if you don’t want to appear credit-hungry.
Not least but not least
A credit history takes time to develop. Depending on how carefully and frequently you use and manage credit, it can take six months or even a year. It takes significantly more time to establish a strong credit rating. Just keep working toward it if you want to get and then maintain a credit score in the excellent range. The secret to obtaining and maintaining a good credit score is perseverance.