Building credit is one task that demands a significant amount of patience, time, and a little money from your pocket. Understand the fact that in order to build credit you will have to use credit. Fortunately, while you are using credit; you can use the minimum of it and still boost your score. All this indeed demands a few nifty moves.
Building good credit will start only if you jump into the cycle of credit. Primarily, a person will have to first acquire credit and then use it till he needs the same. The crux of it is those obtain small loans, and ensure that you pay on time so that your score starts building. This will gradually help you increase both the quality and quantity of your credit. After a certain period of time, you will be able to replace secured loans with unsecured ones and can borrow more. Gradually, before you figure out you will be ready with a good credit portfolio.
Consider the following steps if you are planning to build your credit score:
- Start with opening a savings account. Use this account regularly and ensure that no checks bounce from your account.
- Make small deposits to this account whenever possible because it will give an impression to the lenders that you have a good habit of saving regularly. Do not withdraw from this account.
- Three banks, three loans, three months!!This is “The Mantra” for building your score quickly. Inform your bank that you are planning to build your score and hence borrowing a small amount. Apply for a small sum of Rs. 20,000/- and do the same with the other two banks, as well.
- Once you receive the loan amount from all these three banks deposit the total amount in your savings account.
- Pay interest to all the banks from whom you have borrowed and also enjoy interest on the amount that you have deposited in your savings account.
- By now you are ready with your principle amount that you borrowed from all the three banks, and also paying your interest on time.
- After completion of three months, withdraw the money from your savings account and pay it to all the three banks.You are now ready with a decent score and can apply for loans and credit cards.
- Start with applying for credit cards and maintain an excellent payment history. This will again help boost your credit score.
- Once you are able to maintain small accounts well, you will now be able to apply for bigger sums as auto loans, mortgage loans etc.
The above-mentioned points are with reference to techniques of borrowing and lending. However, beyond techniques and books, comes “Relationship.” Ensure that you build a good relationship with your lenders and banks. After all, lending and borrowing depend on a lot on the relation you have with them.