Are you one of those who have never applied for a credit card or loan? If yes, then most likely you do not have a credit history. If you’re just starting with your credit journey and need guidance to build it the right way, we’re here to help.
A good credit score is a key to get a wide spectrum of credit cards and quick loan approvals. But to open the line of credit, you need to build a credit history the right way. Here are a few tips that will help you build a good credit history from start.
Top 7 Tips to Build your Credit Score
Tip #1 Apply for a Credit Card
Most lenders and credit card companies hesitate to lend money to people without a credit history. This is because your credit history is the only way they can assess whether you will repay the loan amount on time or not. Therefore, to build credit, you must use credit.
Now the most important question that arises is without lenders willing to give you credit, how can you build credit? Luckily, there are a few ways you can use to overcome this issue.
One of the most common financial products that can help you begin your credit journey is a credit card. Applying for a credit card is the easiest and the most common way to build your credit score on your own. There are two types of credit cards that you can apply for – secured and unsecured.
Unsecured Credit Card
The unsecured credit card is the best option to build your credit score, but beginners usually cannot avail it due to no credit history. Unsecured credit cards, unlike secured credit cards, don’t require collateral or security. To get an unsecured credit, applicant must have substantial and good credit history along with sufficient income that demonstrates his/her credit worthiness. If you’re earning, you can try applying for an unsecured credit card. If you get it, start building your credit score from it else move to the next type of credit card, which you can avail without trouble.
Secured Credit Card
The secured credit card is another type of credit card that you can avail of if lenders are not paying any heed to your unsecured credit card application. Those who are not earning and also are new to credit must straightaway apply for a secured credit card as they are not eligible for an unsecured credit card. Credit newbies can easily access secured credit cards as they are given against a security amount or collateral. In most banks, the security is usually in the form of a fixed deposit.