Credit Cards

4 Unconventional Ways to Build Credit

I’m sure you have heard of the obvious ways you are supposed to build a good credit rating. Pay your bills on time, take out a small loan, get a credit card, or start with a secured credit card. All of these are great pieces of advice, but you may want to see some more options. There are lots of other ways you can start to build your credit score. The following ways to build credit are probably discussed less than more obvious options because the obvious approaches will help you faster. This is why you should still try to do everything you can and make the best financial decisions for you when you are building your credit. Here are a few unconventional ideas that could help you raise your credit score.

Become an Authorized User

One of the best ways to start learning how to use a credit card properly is to become an authorized user on one of your parent’s credit cards, but only if your parents have established good credit. If your parent has good credit, your credit score will get a boost as well. With this authorized card, you will probably spend less money because you will know that your parents are going to see where you are spending that money. It will be even better if your parents make you pay off any credit you use because it will allow you to learn how to spend your money and pay off your debt responsibly. Your parents can monitor your spending and teach you the proper way to use a credit card as you start to build your credit score. Then, when you have built up enough credit, you can get a card of your own.

Get a Co-Signer

Finding someone with good credit to co-sign on a credit card application is very similar to becoming an authorized user. With this option, you are able to get your own credit card much easier because someone with an established credit history is agreeing to help you if you are not able to be responsible with the card. Their good credit still gives your credit a boost, and you can then use the card to make timely payments and establish credit of your own.

The best co-signers will always be parents and other family members with your same last name. Lenders may get suspicious if you try to apply for a card with a co-signer who isn’t related to you. Usually, the most effective relationships with co-signing are those in the applicant’s family.  Both parties will be responsible for payment on the card, so the applicant will be more likely to try to get the approval of their relatives. They might not try to get this same approval from friends or acquaintances should they decide to co-sign for the card.

Get a Retailer Credit Card

Most people only consider secured credit cards when they think of getting a starter card, but there is another great option. A retailer credit card from a store like Macy’s, Kohl’s, or Sears will be much easier to get than other unsecured credit cards. They won’t affect your credit score as much as other cards, but it is definitely a place to start.

Before you decide on any retail credit card, make sure the store will report to all three credit bureaus. Also, make sure you read the credit card contract entirely because some cards will have incredibly high interest rates, some as much as 30%! If this is the case, you will want to be very careful about making your payments on time.

You will want to be careful about applying for too many retail credit cards as well. Many consumers get a lot of these cards so that they can take advantage of cardholder discounts, but the lender will bring up your credit report every time you apply for a new card. Too many hits on your report in a short period of time (like over the holidays) will actually decrease your credit score.

Get a Good Job

Not only will a good job help you pay your bills and other payments on time to improve your credit score, keeping that job will help your credit as well. On your credit report, there is a section where the credit bureaus record your employment history. This is here to help employers verify the information of potential employees, but it also gives lenders some information about you and your character.

Lenders like to see stability when they look at a credit report and employment history. This usually insures that the person will continue to be stable in their finances. If you stay at the same job for years and your salary continues to rise, that will usually indicate that you will be able to repay your credit in the future as well.

Remember that it is very important to check your credit report often. When you are informed about what you are doing well and what you need to change, it will be easier for you to build your credit and maintain a good credit score in the future.