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Improve Credit Score

The Most Effective Ways to Improve Credit Score

If you are brand new to the credit game (typically those who have always paid cash for everything) your credit scores are probably very low. You will need to improve your credit score before lenders will extend you credit. Here are a few things you can do to improve your credit score.

Open a bank account to improve credit score. You have very little credibility with lenders if you don't have at least a checking account and, preferably, a savings account. These accounts don't actually appear on your credit report, but bank account numbers are often requested on credit applications. Plus, successfully managing your bank accounts can help you establish a positive credit history and improve your credit score.

Apply for a secured card to improve credit score. A secured card requires you to deposit a cash amount (used for collateral) that becomes the line of credit. You use the card just as you would any other credit card. Buying a few things and paying them off every month demonstrates financial responsibility and will improve your credit score. Just make sure the card issuer reports account activity to the credit bureaus and after about a year you should be able to qualify for an unsecured card.

Become an authorized user to improve credit score. You can be listed as an authorized user on someone else's credit account. Even if the primary card holder won't let you use the card for purchases, you can still improve credit scores as an authorized user so long as the account information is reported to the bureaus and recorded in your file, and the account is in good standing. If the account is not in good standing, you can request the credit reporting agency to remove it from your report so you won't impede your efforts to improve your credit score.

Apply for a personal loan to improve credit score. In your name: A small personal loan can help show your credit worthiness and improve credit scores. Most banks and credit unions will extend a small personal loan to most individuals who can show financial stability (a job with steady income) and ability to repay (your income has to exceed your debt). If you get the lone, use it to buy an item that can be paid off in installments for at least a year. Just be sure to make all payments on time and you will improve your credit score.

With a co-signer: If you can't get a loan, ask a friend or family member to co-sign for you, preferably someone who has great credit. Your co-signer's good credit makes you look more creditworthy. If you make your installment payment on time each month, you can improve your credit score very quickly. Be careful about choosing a co-signer, however. The records for the shared account, both good and bad, can appear on both the co-signer and the borrower's credit reports for 7-10 years.