14 Jul 13 Unusual Ways to Build Credit
As young adults, we all want to know the secret to building our credit score. Though a bad credit score is, understandably, worse than an under established credit score, we still want to be prepared. Having an excellent (or good) credit score can mean a world of difference when it comes to obtaining proper housing, auto loans, mortgages, and reasonable student loan repayment plans. The better your credit score, the better your chances of saving in both interest rates and loan lengths.
We all know the obvious ways of increasing your credit score:
1. Establishing a long, mixed credit history that proves your ability to repay borrowed money.
2. Opening different types of accounts to show a mixed interest in the market.
3. Using your credit to obtain items that would otherwise be outside your reach.
4. Paying your minimum payments (or more) on time, to prove your reliability.
5. Avoiding inquiries on your credit score whenever possible.
6. Paying close attention to changes in your credit score, and establishing a goal to obtain.
These are credit boosting actions that you’ve been taught since you turned eighteen – maybe sooner. Simply viewing your credit online through CreditKarma or Credit.com will tell you how to make an action plan and follow these steps.
However, many young adults aren’t taking advantage of all existing paths to increasing their credit score. So, to share vital information with the next generation, we’re going to give you thirteen unusual methods that you can use to give your score a much-needed boost.
1. Keep your credit accounts open – even if you hardly ever use them.
If you opened a credit card account when you were eighteen-years-old for odds and ends, but hardly ever use it now because you have a shiny rewards card, keep your old account open. It can come in handy if you ever lose your new card (or have trouble making a purchase). Plus, having multiple open accounts increases your credit limit and (therefore) lessens the blow of large purchases on your overall credit account.
You want to keep your available credit around seventy percent at all times, and unused accounts can make that goal more attainable. Rather than “cleaning house”, think logically. There aren’t any downsides to having a credit card that you only use in case of emergency.
2. Request a good-will deletion from your lender or reporting agency.
Many young adults don’t realize they have this option – but most credit holders with positive payment history on their credit score can request a good-will deletion when a payment runs late. Since there are plenty of reasons why payments can fall behind (bounced checks, bank complications, etc.), having the opportunity to remove the blemish from your report can mean the difference between obtaining a new loan and walking away empty-handed.
Read This: How to Clean Up your Credit Report?
If you’re concerned about a blemish on your credit report, speak directly with your lender. If the reporting agency complies, you might see that spot disappear forever. Keep in mind that, in order to have this opportunity available to you, your payment history needs to be spotless – specifically with the lender you’re interested in asking for a deletion.
3. Pay off your credit cards more than once per month.
We all know the age-old rule. Pay off your credit card before the end of the month. Or, at the very least, get your credit use below 30% of your total credit limit. But there’s actually a more efficient way to pay off your credit card. Instead of waiting to add a lump sum at the end of the month, add small increments over the course of the month.
As you get paid, consider adding fifty or sixty dollars to your credit card. This will ensure that credit companies don’t over-estimate your credit percentage when your next report is issued.
4. Avoid creating new utility accounts, if you can simply redirect old ones.
If you’re moving into a new apartment, you might consider creating new utility accounts – in order to establish a clean slate. This isn’t as beneficial as you might believe. Opening new utility accounts involves a credit check for each account opened, while can hurt your credit score with unnecessary inquiries.
Avoid this issue by redirecting old utility accounts to your new address. This avoids further credit checks and keeps your financial information stable.
5. Turn in your library books!
Most young adults are completely unaware of the fact that libraries can (and will) contact reporting agencies about your overdue library books. As long as you are over eighteen years of age, libraries have the right to report your overdue balance – as well as any outstanding fees. This can hurt your payment history and your overall credit score. To keep your score as high as possible, turn in your books on time and don’t avoid fees.
6. Build lender loyalty.
We sometimes forget that going into debt benefits a lending company – which makes us customers, in a way. Loyal customers are generally involved in loyalty programs. The more often you work with the same lender, the more likely you are to receive benefits from your loyalty. This can include lower interest rates, longer loan periods, and less pressure to settle – upping your credit score in the process.
7. Learn to appreciate your old debt.
Many credit holders attempt to wipe their slate clean as soon as a car or mortgage is paid off. This is unnecessary, and actually hurts your credit reputation. An adult who has proven, time and time again, that they can pay back a long-term loan is far more desirable than one who hasn’t. Let your old debt stick around. You’ll learn to appreciate it later, rather than viewing it as an eyesore.
8. Don’t obsess over your credit score.
Obviously, you should check your credit score at least once a month – and you should care about the results. But raising your credit score takes time, effort, and stability. If you obsess and try to make large changes happen too quickly, you’ll end up hurting your credit score – rather than helping it.
9. Avoiding being labeled “risky”.
This means, while inquiries can hurt your credit score, you want to focus on the big categories – such as payment history and account mix. If you open and close accounts too often, you’ll be labeled a risk. If you fail to meet your monthly minimum payments, you’ll be labeled a risk. You should avoid inquiries, but payment history and account mix are on an entirely different level. These are the categories in which you should take the most pride, because they take the most work to keep clean.
10. Request credit increases frequently.
In order to increase your credit score, you have to use your credit. While you don’t want to request increases in your credit limit too often, you should request an increase on an annual basis – and that’s for each credit card you own. Your increase should cap at ten percent of your current limit. Beyond that, you’re risking a dip in your credit if your request is declined. Keep in mind that you should only request an increase if you’ve been consistent in your payments – and in using your card.
11. Study your annual credit reports.
By checking for mistakes in your annual (free) credit reports, you can significantly increase your credit. These credit reports often allow disputes on numbers – including your payment history. If your credit score doesn’t seem quite right, this is a path you should pursue as soon as possible. However, since you only receive one free report each year, you should be mindful about when you choose to request it.
12. Avoid working with a cosigner – it doesn’t help your credit score.
Believe it or not, having a cosigner helps your cosigner more than it helps you (if you make your payments, that is). You will see very little activity on your credit statement, even if you are the only person making payments on your loan. Another downside? Your cosigner is on the hook if you don’t pay on time – which can cause rifts between family, friends, and partners.
13. Attach your rent payment to your credit score.
Only certain companies allow you to add rent but, if you contact the company through which you rent your apartment, it should be able to send a request to your reporting agency. Since you pay rent on a regular basis (and probably never miss), it’s a safe bet that your rent payment will improve your credit score.
These are just thirteen unique ways to increase your credit score. There are many, many more. The best way to discover them is, of course, through experience. You can also stick to more traditional methods for the first several years of your credit history, then branch out when you feel more comfortable.
Good luck with your credit boosting ventures, and don’t forget to come back for more great credit-related tips to improve your financial portfolio!