This section is dedicated to those who want credit, but simply have chosen either to not establish credit, need to rebuild heavily damaged credit, or are just starting out down the road of "credit" life.
For home-buyers, a credit file is not required in order to purchase a home. However, this would be a tremendously complicated matter to address within this Topic. Just keep this fact in mind, you don't actually need to have a credit file to purchase any home.
Outside of being issued credit through a standard credit application process, there are only three rebuild/establish methods I have documented that one can use to establish or repair poor credit. The simplest and quickest method requires a third party with good credit such as a mother, father, brother or sister.
This method consists of being added as an "Authorized Signer" on an existing credit card. By doing this, your credit file receives the benefit of someone else's credit. This is an effective way to establish a positive credit line with on time payments. Just think, if someone misses a payment you just remove yourself and instant removal of bad credit. Catchy!
The second method consists of Secured Credit Cards. Yes, they are expensive, however, having no credit established can cost you even more. So, I recommend taking out one MASTERCARD® and one VISA® secured by whatever the MINIMUM allowed is. Use the card and make sure you make payments to the creditor on time as this will affect your credit in a negative way if you are late defeating the entire purpose.
The final and most recommended method involves your local credit union and/or bank. I highly suggest taking out a loan against your certificate of deposit. A nominal loan amount of 500.00 to a 1000.00 with repayment terms of 24 months is recommended to keep monthly payments low. What? You don't have a certificate of deposit? Exactly. The loan you take out is secured by your new certificate of deposit using the loan proceeds. This is a fast and effective way to build Installment loan credit.
Why I personally recommend this secured installment loan is the fact it not only helps you establish credit, but teaches savings. The added bonus is while establishing credit you are saving money you can use towards the purchase of your first home. Now that's a great concept and building credit in the most constructive manner possible!
The most important thing to keep in mind is insuring the payments and terms are acceptable to your budget and that the financial institution reports these types of loans to the applicable credit reporting agencies. Feel free to take out as many as your budget can reasonably support.
These are the only only legal methods for establishing or reestablishing a credit file I am aware of. I'd love to have your feedback if you can think of some additional options for those that just can't get credit based upon a existing or nonexistent credit file.
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