Building a Perfect Credit Score: Start from Scratch

Building something from scratch is already a tough challenge itself. And when it comes to credit, it’s either you should take out a loan or get a credit card.

But that’s where it starts to be complicated. You cannot get a credit card or qualify for a loan if you do not have a credit history, to begin with.

So, first and foremost, start with a bank account. Your credit history does not need to be that long to open a checking account.

A checking account allows you to get a credit card or qualify for a loan from the same bank. From there, you can start developing a relationship with the bank by doing good business and performing well on payments.

Those practices will help you gain your first line of credit.

Now that you’re done with the first step to achieving the highest credit score, it’s time to move on to the next.

Here are a few other things that you need or might want to consider when building your credit from scratch.

Secured credit card

A secured credit card is what some banks are offering individuals who wish to rebuild their credit. Even those who want to strengthen their credit score can get a secured credit card.

With a security deposit, it allows you to secure the amount of money that you borrow. Meaning, you will need to deposit a certain amount into that account.

In case you default on the loan, the amount you deposit will be equal to your credit line. The good news is, the banks will still trust you that you can pay them back even if you do not have an established credit history yet and a large amount of credit.

You can build or rebuild your credit score if you need to because you will be using your first card to build your credit. And since you will be using your first card, you have to see to it that once you start using it, your lender must report all your on-time payments.

You may also want to check your payments ahead of time every once in a while. Most Banks and establishments especially credit unions do report your on-time payments but sometimes, some retail store cards do not.

The tendency is, if the issuer of the card does not report your payment history, you will need to shop for more cards. The thing is, you shouldn’t apply for a lot of different cards if you keep missing the payment due.

Aside from the fact that these will reflect as hard inquiries on your report, it will not help build your credit score.

Co-signing

To build credit from scratch, you can also resort to this method called “co-signing”. But remember, it is not something you can ask for lightly because someone else’s account/credit will be put in the line if you are reckless.

Ask someone close to you — a very close friend, a family member, etc. — if they are willing to cosign a loan with you. You can ask for help from anyone who has established their credit history.

When he or she cosigns a loan with you, you will adopt their good credit history to help you get approved. In other words, you can benefit from the credit history that they have been building or maintaining for years.

From there, you may now start building your own credit by maintaining a good payment history. Remember that whoever agreed to cosign with you will hold a huge responsibility.

So, as much as possible, do your best to be responsible with your finances. Do so with careful financial management and maintain that good habit even until establishing your own credit.

Piggy-backing

This technique is recommended for persons who are helping others (who don’t have their own credit) by letting them use their credit. Here is how it works; The person without credit can add his/her name to a person that has an established credit card.

The established credit person simply adds on to their account the person who doesn’t have credit. The person without credit will get the person with credit onto their credit report helping them to quickly build a credit score.

There is also another advantage that is far better than the person with credit to cosign on a loan. A co-signor will be held responsible for the loan he or she cosigns for it and it goes bad.

The piggybacker can just allow the person without credit to obtain all the past credit history, just don’t let them use the card. That’s the safest advice here.

A good credit score may open a bunch of financial opportunities for you in your lifetime and now is the time to realize the value of maintaining a good financial habit.

Want to achieve the perfect credit score? Or the highest credit score? Begin your journey with Koi.Credit.