Get Credit For Rent And Utility Payments
Rent reporting services can add your on-time rent payments to your credit reports. Rent payments are not considered by every scoring model VantageScores include them but FICO 8 does not, for example. Even so, if a would-be creditor looks at your reports, rent records will be there, and a long record of consistent payments can only help.
Experian Boost also can help, but in a more limited way. You link bank accounts to the free Boost service, which then scans for payments to streaming services and phone and utility bills. You choose which payments you want added to your Experian credit report. If a creditor pulls your FICO 8 using Experian data, you get the benefit of that additional payment history.
Impact: Varies.
Time commitment: Low. After initial setup, no additional time is needed.
How fast it could work: Boost works instantly rent reporting varies, with some services offering an instant “lookback” of the past two years of payments. Without that, it could take some months to build a record of on-time payments.
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What Does It Mean To Have No Credit
Having no credit doesnt mean you have bad credit or a bad credit score. It simply means youve never applied for a loan, credit card or any other form of financing. Thus, you dont have credit history with any of the three major credit reporting agencies Equifax, Experian or TransUnion.
People with no credit are sometimes considered credit invisible because of their limited credit history and lack of score. Some people believe they can build credit by making payments to utility companies or rental agencies. However, these payments are rarely reported to the bureaus, so they dont affect your score.
According to a report from the Consumer Financial Protection Bureau , around 26 million Americans are credit invisible. Another 19 million people have a credit report but dont technically qualify for a credit score. This is because you need at least one account on your profile to start building credit.
For FICO, you must have an account thats 6+ months old to establish a credit history. VantageScore simply requires you to have an account. Unfortunately, without a credit history, you wont meet the minimum requirements to have a VantageScore or FICO credit score.
To learn more about starting credit scores, check out this video:
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Always Make Payments On Time
Once you have a credit card, make sure to pay your bill on time every month. Your payment history is the single most important factor in your credit score, accounting for 35% of your FICO® Scoreâ .
Keeping your credit utilization ratio low is another way to build good credit. This ratio refers to the percentage of your available credit you’re using. If your credit card has a limit of $200 and you’re carrying a balance of $100, you’re using 50% of your available credit. Maintaining a credit utilization ratio below 30% of your credit limit will help to boost your credit score. Paying your balance in full each month helps tooâand will also prevent you from accruing interest on your purchases.
Do you have any outstanding student loans? Paying those bills on time can help improve your credit score. Student loans are installment credit, while credit cards are revolving credit. Having a mix of both types of credit helps to increase your credit score. Finally, if you pay your own cellphone bills or utility bills, consider signing up for Experian Boost®ø, a free service that adds on-time payments for those services and more to your credit report, potentially helping improve your FICO® Score.
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Apply For A Better Credit Card
Youâve managed your bank account responsibly, paid all your bills on time every month and used a credit builder card to build up your credit score. Now, itâs time to start reaping some of the benefits of your hard work.
Once youâve built up your credit score to a certain level, youâll have a greater chance of qualifying for a better . Aside from a lower interest rate and a higher credit limit, a new credit card could also give you the following:
Of course, you still need to approach with caution, as otherwise you may do more harm than good. In particular, you should:
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Check your eligibility using ClearScoreâs eligibility checker before applying.
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Avoid making several applications in a short period, as this could negatively affect the credit score youâve worked so hard to build.
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Try not to use more than 50% of your credit limit and always pay what you owe on time.
The Purpose Of A Credit Score
Before we dive deep into the factors that shape your credit score, it helps to understand why companies care about credit scores in the first place. Spoiler alert: Its all about the money.
The FICO Score, used by 90% of top lenders in the United States, analyzes the information on your credit report. Then, it predicts how likely you are to pay a bill 90 days late within the next 24 months.
FICO scoring models rank-order credit reports on a scale of 300 to 850. If your score falls on the higher end of that range, you have a good credit score. That higher score tells lenders youre less likely to fall seriously behind on credit obligations. If your score is low, the lender knows that the risk of you paying late is greater.
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Length Of Credit History
As a general rule of thumb, the longer an individual has had credit, the better their score. However, with favorable scores in the other categories, even someone with a short credit history can have a good score. FICO scores take into account how long the oldest account has been open, the age of the newest account, and the overall average.
Keep Your Credit Utilization Ratio Below 30%
One of the most important metrics for judging the impact of your credit card debt is the or credit utilization rate which is the amount of credit used versus the credit line authorized, i.e., your credit card balance versus your credit limit.
The importance of the CUR is that you cant judge creditworthiness simply by the total of your credit card balances. Rather, creditors contextualize that total by comparing it to the sum of all your credit card credit limits.
For example, the fact that John owes $5,000 on his credit cards while Mary owes $3,000 does not necessarily make John a greater credit risk. If Johns credit lines add up to $20,000 while Marys total $6,000, some simple math puts their CURs at 25% and 50% respectively. John is in much better shape, credit-wise, than Mary, who needs to reduce her balances by at least $1,200 just to reach the critical 30% CUR target.
The following chart from Credit Karma shows the relationship between CUR and credit score:
How do we explain the relatively low average credit for the 0% CUR? We guess that some of these cardholders simply dont use their credit cards much and therefore have little opportunity to improve their credit scores. Further research is needed to nail down the answer.
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Should You Hire A Credit Repair Company
Theres no way to raise your credit score overnight, and any credit repair company that offers fast solutions is likely trying to pull the wool over your eyes. In fact, the Federal Trade Commission even has a webpage dedicated to warning people against credit repair scams.
There are legitimate steps you can do yourself without having to pay a credit repair company to repair your credit. These steps include reviewing your credit reports for errors, paying down debt and getting a credit card that reports on-time payment activity to the credit bureaus. In other words, taking steps to fix your credit on your own is likely to be safer and cheaper than looking to a credit repair company.
For those situations where managing your debt and fixing your credit seem impossible on your own, a nonprofit credit counseling agency may be a better choice than a for-profit credit repair company.
If you decide to go with a credit repair company rather than fixing your credit yourself or working with a nonprofit credit counseling agency, its important to know your protections under the Credit Repair Organization Act . The law requires these companies to explain the following:
- Your legal rights in a written contract and the services the company will provide
- That you have three days to cancel without any charge
- How long itll take for the company to get results for you
- The total amount youll pay the company for credit repair services
- Any guarantees the company makes to you
Start Using Your Credit Cards Like A Debit Card
While you should avoid using a credit card for large, extravagant purchases you cant otherwise afford, it can make sense to use credit cards for everyday purchases like groceries, gas, bills, and subscriptions. If youre still paying down debt, do this on a separate card so you can avoid carrying a balance.
How can this spending swap benefit your score? It prevents card issuers from closing cards or reducing credit limits due to inactivity. And when you pay off your balance each month , it shows you can use credit responsibly.
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Pay All Your Bills On Time
On-time payment history is the most important factor when building credit. Your payment history, which is one factor that makes up your FICO score, accounts for 35% of your FICO credit score. This means you should always aim to pay your bills on or before the due date.
Setting up automatic payments is the easiest way to pay bills on time. Youll connect your bank account to the provider, who will automatically charge your account on or before the due date. Creating automatic payments means you wont have to worry about missing a payment, as long as you have enough money in your bank account to cover the bill.
If you choose to not use autopay and realize youve missed a payment, contact the lender or bill provider and rectify it as soon as possible. Only late payments over 30 days are reported to the credit bureaus. The later the payment, the more it will impact your score.
Open A Store Credit Account
Many stores offer credit accounts. Most are reported as revolving credit, the same as a credit card. Home Depot offers project loans. Many local home improvement stores also offer credit accounts, and some are available with the payment of a deposit in lieu of good credit. Staples office supply store has several credit products, including a personal credit account administered by Citibank. Before applying for store credit, be sure the vendor reports to the credit bureaus.
Also, keep in mind that some are better than others for people with poor credit scores, while others can help individuals recover from poor credit.
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Building Credit Without Credit Cards
The need for good credit history is inevitable for most of us. When the time comes to buy a car or a home, rent an apartment, set up new utility accounts, obtain a cell phone, or handle other financial transactions, a healthy is crucial. For many, the first step in establishing a credit history is through the use of credit cards.
Luckily, only a small portion of your is based on having and using revolving credit products . However, consumers who can’tor don’t want toobtain a credit card can build a credit history in other ways.
Pay Down High Credit Card Balances
Opening more credit accounts is a great way to improve your credit score over a couple of months because it doesnt require a large chunk of money upfront. Paying down your credit card balances, on the other hand, can have a longer-term project.
If your credit cards are maxed out, then paying them down will improve your financial situation and your credit score rapidly. is an important credit scoring factor, so using more than 30% of your available credit hurts your credit score.
There are two common approaches people use to pay off their debts over the long term:
- The debt snowball method: Pay off your accounts in order of lowest to highest outstanding balance.
- The debt avalanche method: Pay off your accounts in order of highest to lowest interest rate.
The debt snowball is widely considered a more satisfying approach. It helps some people feel like theyre making progress by paying off accounts in full.
However, the debt avalanche method will save you more money. If you have an account thats accruing interest at a much higher rate than the rest, it would make sense to tackle that one first, regardless of the account balance.
Heres a quick example. Imagine that you have three credit cards with balances of $500, $2,000, and $5,000. Their interest rates are 18%, 20%, and 25%, respectively.
If you took the debt snowball approach, youd target the credit card with the $500 balance first and pay it off quickly.
Under 30% is good.
Below 10% is even better!
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Pay Your Bills On Time And In Full
Payment history accounts for just over a third of your credit score. Credit scorer FICO recommends that you always pay your bills on time to avoid late fees and negative marks on your credit report. While credit cards and loans almost certainly appear on your credit report, other billers, such as utilities and cell phones, sometimes report payment histories too . So paying on time is important for all your bills.
Ideally, pay off the balance in full each month to avoid paying interest charges. But if this isnt possible, be sure to pay at least the minimum amount required every month. And if you can pay a little more than the minimum, it can save you on interest costs in the long run.
Protect Your Identity With 24/7 Identity Monitoring
In addition to credit monitoring, Credit Journey also provides free 24/7 identity monitoring. While credit monitoring keeps track of fraudulent activity on your credit report, identity monitoring offers dark web surveillance, data breach monitoring, social security number tracking and identity verification alerts.
Many other companies charge for these services, but Credit Journey offers them for free.
Millions of people suffer from identity theft each year, and it can sometimes take years to recover from the damage of having your identity stolen. The earlier youre made aware of identity theft, the sooner you can take the steps necessary to get your life back and Credit Journey can help you do just that.
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Set Up Automatic Payments
This is the most important step in the process. Missing just one single payment can ding your credit score and incur interest, so set up automatic payments to ensure your credit card bill, student loans, and other debts are paid on time. Once youve set up your automatic payments, double check that theyre scheduled correctly and on time. Once youve double-checked, triple check.
Your payment history is the biggest score influence, accounting for 35%. So paying your bills on time is a huge help, even if youre not able to pay your balance in full.
Its also smart to check your credit report to make sure it accurately reflects your good behavior. About 1 in 5 consumers has an error on their report, according to the Federal Trade Commission. You can get a copy of your report at AnnualCreditReport.com.
Apply For A Secured Credit Card
A secured credit card requires a security deposit usually around $200 that usually serves as your limit. Because of this, theyre less risky to credit card issuers and are fairly easy to qualify for.
Once you have the secured card, you can use it for small purchases. Each month, youll need to make at least the minimum payment on the card. The card issuer will report your payment activity to the bureaus, resulting in a credit score increase. However, if you fail to make a payment, the issuer will use the deposit instead.
Secured cards usually come with higher interest rates than unsecured cards, so its best to pay off your balance in full each month.
Secured credit cards tend to be less of a risk for issuers since you yourself are providing a security deposit.
Best Secured Card for No Credit
The OpenSky Secured Visa Credit Card is best for no credit borrowers since it doesnt require a credit check. The issuer reports to all three reporting bureaus and is a great way to establish credit.
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How Do You Get A Perfect Credit Score
Income, savings, and investments have no bearing on your credit score. Itâs simply a measure of your debt management skills. A high credit score can be achieved by showing financial institutions that you are always able to repay your loans on time. Aside from on-time payments and low credit utilization, perfect scores are also distinguished by two other factors, notes the team over at Bungalow.
Perfect credit score holders:
- Have a greater number of credit cards. An average of 6.4 credit cards are owned by people with perfect credit scores, almost twice the national average of 3.8.
- Perfect credit card scores averaged $3,025 in debt. Nationally, the average salary is $6,445.