22 May How Loans Help You Improve Your Credit Score
There are hundreds of websites, companies, and business advisors who offer their services as consumer counselors and promise to show adults how to improve their credit scores. Much of the advice they offer is overlapping and covers the same basic territory. One intriguing thing you’ll discover if you pay the fee to hire one of these professionals is that taking out various kinds of loans can rapidly boost your score.
Repaying a balance in regular monthly installments, no matter the reason you borrowed the funds, shows other prospective lenders that you honor your financial obligations. As time passes, and you continue to pay your balance down, your credit scores climb. What kinds of debt should you consider taking on? Here are some of the most common and effective kinds of borrowing that will help you give a jolt to your financial reputation, as measured by the major reporting agencies.
Vehicles
Signing an agreement to pay for a car over a three to six-year period is perhaps the most common way that adults pump up their creditworthiness. Even though a good number of consumers purchase vehicles for cash, the majority still use bank or dealer financing to get behind the wheel of a new or used car. If you have good enough credit to get a competitive interest rate on a vehicle, consider signing a contract and having the monthly payment deducted straight from your checking account.
Education
Student loans are one of the smartest ways to pay for college or graduate school. In addition to competitive interest rates and long repayment periods, education debt allows students to focus on their studies without having to work full time during school. After all, the getting good grades is what makes your degree all the more marketable once you graduate. Plus, the application process is easy and can be done completely online.
Homes
If you can quality for a mortgage when the time comes to purchase your first home, you’ll likely notice that your credit scores are measurably higher about one or two years after you take possession of the property. Repaying a mortgage contract on time is one of the single most powerful ways to improve your ability to borrow more money in the future. A few years down the road, you’ll have the opportunity to borrow against the equity you’ve built up in your home.
Secured Credit Cards
For young people who have no financial history but want to get started off on the right foot, secured cards offer an easy way to begin. Simply choose one of the top bank cards that lets you put a few hundred dollars into a secured account and then begin using your card. The bank has no risk because you’ve already deposited cash to back up whatever you use the card to buy. But banks still report this activity to all the major agencies, thus giving your scores an all-around boost. If you choose this method, remember to pay off your full balance every month and to never max out the card.
