How to Build Credit

One easy tip to help improve your credit score is to have an open unsecured credit card. With this credit card you want to keep the balance around 10% of the credit limit.

In other words if your limit is $1,000 then try to keep the balance around $100. This shows the credit bureaus two things:

1. You use credit.

2. Your ratio of available credit to debt is high.

This means you have available credit that is not being used. The credit bureaus place a large emphasis on your available credit to debt when they calculate your credit score.

By showing you have credit that is not being used; your score will get a bump. This method is most effective with a revolving line of unsecured credit.

Another tip, if your credit is to low to be approved for an unsecured credit card. Then ask a friend or relative with good credit to add you as an authorized user to their credit card account.

This is called piggyback credit. There have been policy changes to discredit authorized users from receiving the benefits on the credit report.

However the credit bureaus are such large bureaucracies that this new policy will not take effect immediately. It is estimated that authorized user’s credit score will still get a bump for the next 6-8 years.

Make sure to use good judgment when choosing a friend or relative. The account will show both positive and any negative information that can be reported. So if the account became delinquent it could hurt your score.

For you to be added as an authorized user, the account holder needs to call the credit card issuer and request you to be added as an authorized user. This can all be accomplished over the phone.

A credit card with your name on it is then issued and mailed to your home. I suggest giving this credit card back to the account holder. This way they assume no risk.

Then all the specifics about the account; payments, balance, limit will be reported on your credit too. This is a great way to show the bureaus that you have made on time payments and have available credit.

This method of building credit is in the process of being discounted. However for the time being it is by far the easiest and cheapest method to building positive credit.

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