Building Credit
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Credit scores are an important factor in your financial wellness. Having a good score can open up a lot of opportunities, and having a bad one can close a lot of doors. Your score is a primary factor in getting a good interest rate on a mortgage, consolidating high-interest debt with personal loans or balance transfer cards, and being approved for valuable travel credit cards that help you travel for less. If building credit or raising your credit score is on your list of goals, there are many tools out there that can help you level up.
Credit Cards
The great thing about credit is that no mistake is permanent—every negative mark (including bankruptcy) will eventually be wiped off your credit report. In the meantime, the most effective way to boost your credit score is to pay your credit cards on time and in full. This will create a positive payment history, which is the most important factor in your credit score.
Secured Cards
A secured credit card is useful for both building credit from scratch and rebuilding credit after a setback. Secured cards work like regular credit cards but you put down a deposit which then becomes your credit line. Essentially, the credit card company loans your money back to you. This reduces the risk to their bottom line but allows you to start building a positive payment history on your credit report.
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Credit Builders
Credit builders are designed specifically for people with little to no credit history and those who are working to rebuild their credit. They offer products including secured cards, lines of credit, and self-lending accounts that are reported like installment loans but act like savings. Unlike other secured cards and credit cards, there is no hard inquiry on your credit to apply so getting started is low-risk and won’t ding your credit.
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Kikoff
The Kikoff Credit Account is a unique tool that helps you to improve your credit score by improving your utilization rate and creating a line of credit that reports to 2 of the 3 credit bureaus, Experian and Equifax.
Kikoff gives you a $500 line of credit that you can use to make purchases within their store, which primarily sells informational resources about personal finance, for as little as $10. Once you make a purchase, you pay it back on time, and Kikoff reports your positive payment history to the credit bureaus, which gives you more positive remarks on your credit report. This history of on time payments and verification of on time bill pay helps to improve your overall credit rating.
This tool is great for people who are just starting to establish their credit profile, those working their way back to a good score after bankruptcy, or those with high utilization rates that are negatively impacting their credit scores.
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Experian Boost
Experian Boost allows users to get credit for on time bill payments to utilities, phone bills, subscription services, and more. All you do is link your accounts you use to pay your bills to Experian Boost, and these bill payments will be automatically calculated into your overall Experian profile. The average user experiences an instant boost of about 12 points to their credit score, and they also provide credit monitoring and free access to your Experian credit report and FICO 8 score. Many users report an instant boost in their credit score.
Experian Boost is best for people who have a “thin” credit history, meaning that you don’t have a whole lot of credit history, or that your credit history is very recent. Those who have “thicker” credit files, such as those with numerous credit lines, types of credits, and a longer average age of accounts, may not see an impact on their scores.
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Self
Self Credit Builder is an installment loan that exists exclusively for the purposes of creating a positive history. It is essentially a secured loan, much like a secured credit card. You put up the collateral in the form of cash (from $300 to $2,500), and the lender holds the funds in a savings account or CD until you have successfully paid off the loan. While you are paying off the loan, which can take anywhere from 6 months to 6 years, the lender reports your on time payments, which in turn improves your credit rating. Once the loan is paid off, you get the balance back, minus administrative fees and interest.
This product is best for people with low to fair credit scores (from 580 to 669), and those who are starting from scratch to establish a credit history. Self also reports to all 3 credit bureaus. Users should be aware that if you do not pay your bill on time, this will create negative remarks in your credit report.
Opinions expressed here are the author's alone, not those of any bank, credit card issuer, hotel, airline, or other entity. This content has not been reviewed, approved or otherwise endorsed by any of the entities included within the post.