You needn’t get a tattoo declaring “I Love Credit Scores” in order to enjoy a lifetime of excellent credit, as roughly 32 percent of people say they’d do in exchange for this golden ticket, according to a recent WalletHub survey. And the 11 percent of people who would spend three years cleaning Chipotle toilets to enjoy the same goal can put down their mops. Although the pressures of daily life can lead people to do some pretty wacky things in the name of financial success, the credit-building process is actually quite simple.
That’s why it’s so important for anyone who’s new to the credit game to focus on the fundamentals, while allowing the results to take care of themselves. More specifically, if you follow these four steps, you’ll whip your credit score into great shape in no time.
[See: 10 Simple Ways to Raise Your Credit Score.]
1. Become an Authorized User
Most credit card companies do not have a minimum age requirement for authorized users, which means you could conceivably add a newborn to your account as soon as he or she gets assigned a Social Security number. This would give the child a huge head start credit-wise, perhaps even enabling him or her to qualify for an above-average offer upon turning 18.
But authorized use needn’t begin that early to be beneficial. Anyone can benefit from being added to a friend or family member’s credit card account, as long as the individual in question has great credit and always pays his or her bill on time. This enables the authorized user to essentially piggyback on the primary account holder’s relatively high credit line and monthly influx of positive information.
The best thing about this arrangement: There’s no downside for the authorized user. Authorized users aren’t responsible for making payments, so they can’t be penalized for missed payments and other derogatory credit-report notations. As a result, authorized users can simply request that any such records be removed, and the credit bureau in question must comply.
2. Use Credit Cards Responsibly
If you’re at least 18, you should have a credit card. You don’t necessarily need to use it, but credit cards are simply the most efficient credit-building tools available to us. Why? Well, they don’t require us to incur any debt, and they report account information to the major credit bureaus on a monthly basis. As long as this information reflects responsibility — either modest spending and on-time payments, or no spending at all — your credit reports will fill with positive information, and your credit score will improve.
It’s also worth noting that you can have your own credit card — and be an authorized user on a friend or family member’s account. In fact, working both angles will help expedite your credit improvement.
[See: Best Credit Cards: Find the Right Card for You.]
3. Pay Off Collections Accounts
Collections accounts are the easiest type of derogatory credit record to get rid of, as the newest credit-score models stop considering such accounts once the balance in question has been paid. So if you want a quick credit-score bump and have some cash to spare, this is one investment that could provide a huge return when it comes time to apply for a loan or line of credit.
Before doing so, however, try to settle the debt for roughly half of what is owed (debt collectors are known to negotiate), and get any agreement in writing prior to paying a penny.
4. Double Down
It’s never a good idea to apply for credit cards en masse or to leverage loans that you don’t really need. But after 12 to 18 months of responsibly using a single credit card, it might be worth applying for a new offer. Your credit will likely have improved to the point that you can get approved for a better deal — perhaps lucrative rewards or an extended zero percent intro rate. Having two cards will also boost your available credit and the amount of (hopefully positive) information flowing into your credit reports each month.
[See: Best Cash-Back Credit Cards.]
Furthermore, responsible use of a loan — be it student, auto, home or personal — will also help improve your credit. But since loans obviously require borrowing money and typically have expensive upfront fees, it’s only worth getting one when the situation demands it. And credit-building alone doesn’t fit the bill.
Finally, it’s important to point out that building credit is not a task that you can set and forget. Lasting credit excellence requires regular monitoring and maintenance. It should therefore be unsurprising that nearly 45 percent of people have fair or bad credit, according to WalletHub data, given that 49 percent have checked neither their credit score nor report in the past year, per the National Foundation for Credit Counseling.
So think of your credit standing as a plant that needs some TLC to grow tall and bear fruit. And get gardening!
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4 Easy Ways to Establish and Build Credit originally appeared on usnews.com
