How to build credit from scratch

Have you ever wondered why you always get rejected when applying for a credit card or a loan?

Building credit for the first time is like the chicken and the egg. To build a credit score, you need to take out a loan or get a credit card, but you can’t qualify for a loan or credit card without a history, right?

Here are several ways to build credit from scratch that could be considered.

Open a bank account. Primarily, people open a bank account to hold their hard-earned money and hope it will grow through interest. If you don’t have a credit report, having one, whether it’s a passbook or a checking account, will help you improve your credit score, which many don’t. Use it regularly – avoid below keep balance and checks issued to bounce, then your bank statements will positively reflect your credit report, which will help increase your credit score over time.

Become a user of an additional credit card. For family members holding a card, they can make their adult children or their siblings holders of an additional card. This way, cardholders can start building their credit by making emergency purchases when no funds are available. They can also use the card for dinner and set aside the fund to pay the bill at the next cut. Of course, there is a risk of the primary cardholder taking all responsibility for the payment in case the additional user is not able to handle the payment well. Therefore, the former can also decide what percentage of their credit limit will be shared with the latter.

Ask for a secured credit card. There are several local banks that offer secured credit cards today, unlike 10 or 20 years ago. This is a card given to a depositor in which the deposit becomes collateral. This happened to me over five years ago when I wanted to get a credit card, but I always got rejected every time I asked for it. The only downside to this system is that you cannot withdraw your deposit because the card is tied to it. After a year, I was able to ask the bank to waive the security deposit and made the card a standalone credit card. Since then I have been able to get more cards from other credit card companies and the rest is history.

Apply for a regular credit card. You must prove to the credit card company that you make enough money on your own to repay everything you spend with your credit card by submitting the usual financial documents such as payslips and tax return . Try looking for a promotional card that offers a lifetime annual fee waiver to avoid being charged with membership fees. If you are approved, you must use it frequently to increase the credit limit in the long term. A higher credit limit gives you more purchasing power to buy not only for personal consumption, but also to start a business. Many suppliers offer their buyers the possibility of paying by credit card, including those who are abroad. After six months to a year, you can try adding one or more cards by applying to other credit card companies simply by showing your existing credit card. I tell you that it will be easier than submitting financial documents repeatedly.

Personal loan. Owning a credit card, although a privilege, will channel your access to other financial products like personal loan due to your credit history. That’s why it’s very important to keep your payment up to date to keep your credit score positive. Personal loan is offered not only by banks but also by other smaller lending companies and even credit card companies. Sometimes you will be contacted by your credit card company to offer you a personal loan because of your good credit rating. Each credit card company has its own brand but serves the same purpose: to allow its customers to take advantage of their other financial products. Banks, especially savings or rural banks, offer personal loans by requiring applicants to submit financial documents such as payslips, employment certificate and tax returns.

I recently tried to complete the personal loan application from a digital bank and it was approved but I did not withdraw it due to the rates, which are higher than my current wallet. But the experience of applying for a loan in less than 10 minutes and getting the result immediately is already such an innovation. I am always impressed with the strength of their underwriting process as they are confident they can make a decision within minutes. Compare that to traditional banks that take weeks or even months to approve a loan.

Auto and housing loans. Few of the privileges of having a good credit rating is qualifying for unsecured auto and home loans. Rather, it is a positive outcome of continuously working to improve your credit score from bank accounts, credit cards, personal loans, among others. And again, taking advantage of these types of loans will keep your credit score in the positive direction.

If you’re thinking of starting to build your credit score or have a bad credit score now, it’s not too late to start somewhere. If you have a good credit score, more options and opportunities await you. You may be able to take advantage of the lowest possible rate and the highest potential credit limit at the same time, in addition to the rewards and discounts that can be rewarded at any time by your partner financial institution.

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