This Byte has been authored by

Paul Borkowski

Anytime you want to take out a loan, start a mortgage, or rent a new place lenders determine your trustworthiness by checking your credit score.

A credit score is calculated by your:

  • payment history

  • amounts owed

  • length of credit history

  • new credit

  • types of credit used

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But what do you do if you have bad credit or no credit at all?

Here are some ways to increase your credit score.

Get A Starter Credit Card

Obtain entry-level credit cards with cash and little to no credit.

Secured credit cards and student credit cards are two of the best options.

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Do: Pay off your balance each month.

Do not: Apply for too many cards.

Pay Your Bills On Time

Your credit score drops each time you make a late payment.

Your credit score grows each time you make a payment on time.

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Become An Authorized User

Ask a family member you trust if they would be willing to add you as an authorized user to their credit card.

This will establish your credit history back to when they first got the card: a great option for people with little to no credit history.

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Quiz

Ezra wants to ask a family member if they would be willing to add him as an authorized user, he should ask someone who:

Report Your Rent Payments

If you rent, you should be raising your credit score when you pay rent each month.

Unfortunately, it is not standard practice for landlords to report your rent payments to credit bureaus.

Companies such as PayYourRent or RentTrack report your rent payments to credit bureaus, raising your credit score each time you pay your rent.

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Take Out A Credit-Builder Loan

This type of loan is low to no risk to the bank because they keep your borrowed money in a savings account until you fully "repay" the loan.

Each time you make a payment on time your credit score will grow.

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Do: Make each payment on time to grow your credit score.

Do not: Miss a payment and damage your score.

Co-sign A Loan

It can be difficult to get a loan with bad credit or no credit.

Co-sign a loan with someone you trust (and who has good credit) to further build your credit score.

Make sure you know they will pay it off on time or both of your credit scores will go down.

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Pay More Than The Minimum Payments

Whenever possible, pay more than the minimum due for debt payments. This will help you:

  • build credit

  • pay off debt faster

  • reduce the amount of interest you pay over time

Paying off your debt in full each month is one of the best things you can do to grow your credit score.

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Quiz

Alex wants to increase her credit score, she should NOT:

Take Action

Having good credit makes life a lot easier.

To establish good credit or improve bad credit:

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