Starting over or starting from scratch with your credit? Be patient.
Building up a brand-new credit history or re-establishing credit after some credit missteps (such as late payments) takes time.
Give yourself at least a year to see some progress with your credit.
Payment history accounts for 35% of a credit score and establishing or re-establishing your credit with a solid year of on-time payments on a credit account, such as a credit card or credit builder loan, is a good way to go.
Building Credit with a Credit Card
A secured credit card is a good credit-building option. With a secured card, you make a deposit with a lender and your deposit is used as a credit line.
Make sure to choose a secured card from a lender that reports to all three major credit reporting agencies — Equifax, Experian and TransUnion.
To build credit with a secured card, make a series of on-time monthly payments and use no more than 10% of your credit line. Stick to small purchases that you can pay off with ease each month.
After a year or more of on-time payments, reach out to your lender about applying for an unsecured credit card account.
Credit Builder Loans
Another credit building option is to apply for a credit builder loan from a credit union. These loans, which have terms of six to 18 months, are good alternatives to credit cards and good credit building tools in their own right.
With a credit builder loan, the money being borrowed is placed in a savings account. And once you pay off a credit builder loan through a series of payments over the course of the six- to 18-month term, you will get access to the money in the savings account.
Loan amounts for credit builder loans can be small, just $500. So there’s no need to borrow a lot of money to build a healthy credit record.
For maximum credit-building, choose a credit builder loan that reports to all three credit reporting agencies.
