Although it can seem daunting to build good credit from scratch, it is possible with just a little bit of time and smart behavior.
Although there are many ways to build construction credit card, you can start small with a credit card. Here’s how it works.
Credit card: How to build credit
Become an authorized user
It is possible to get credit by becoming an authorized user of your parent’s or partner’s credit cards. Authorized users are basically extensions of the primary cardholder. However, they don’t have to pay the bill and don’t need to be credit checked.
Secured credit cards are a good option.
To build credit, you might consider a secured credit line. A secured credit card allows you to make a cash deposit at a bank to open a line credit. The card can then be used to make purchases to the limit. The bank will send a report to Equifax, TransUnion and Experian detailing your payments each month.
Get a credit card that offers great rewards
After you have established your credit score, it’s possible to apply for your credit card. Every credit card worth getting will offer a range of benefits and rewards. These include cash back, travel perks, bonus points, and cash back on qualified purchases. There are many great credit cards available that don’t charge an annual fee, including premium credit cards with a $550 annual fee.
Check your credit limit
The bank will determine your credit limit when you are approved for a card. This is based on your income as well as other credit factors. Your credit utilization rate is the percentage of your total credit limit you use each month.
To maintain good credit scores, you should aim for a credit utilization ratio of 10% or lower. It is easier to get credit the more you have. The bank will automatically increase your credit limit if you keep your spending under the limit and pay on time. Call the bank to request an increase in your credit limit.
Know your payment due date
Before you swipe your credit card, it is important to know the due date for your monthly payment. This date will appear on your online account. It is the date when your entire outstanding balance is due each month to avoid any late fees.
Find out your annual percentage rate (APR).
An annual percentage rate (APR) is a percentage of the outstanding balance that you will be charged for maintaining the card balance past the due date.
Your credit history is a major factor in determining the APR of a credit card. It can vary from 17% to 26 percent, but some cards offer introductory rates as low as 0% for just a few months. If you make late payments, some banks will increase your APR.
You can use the card to purchase
You can earn points, miles, cash back, and other benefits by opening a rewards credit account. Even if you don’t earn rewards, it is important to use your card to establish a relationship with the issuer. Your credit score may drop if you have little or no activity.
