People need credit to be able to do the things that they need to do. For example, they cannot get a loan without good credit scores, and some employers will even refuse to hire them if they don’t have a positive credit history. If they manage to obtain a loan, they will receive the highest interest rates. In this climate, how does someone get credit from a bank?
Step 1: Open a Bank Account.
The first step is to open a savings account and a checking account. These accounts will be a record of how fiscally responsible people can be, which is needed if a person doesn’t have credit scores. If these accounts show that a person pays her bills on time, it will benefit that person. For example, if the person’s utility company reports to the credit bureaus, it will contribute to their credit scores.
Step 2: Submit a Credit Card Application.
The next step is to apply for a credit card. The most effective way to develop a credit history is to obtain a credit card. For example, someone without a credit history may not qualify for a credit card, but this person can apply for a secured credit card. A secured credit card gets linked to the person’s bank account. The credit limit on the card will be the amount of money that the person deposits into the account.
Credit card companies report the person’s payment history to the credit bureaus, but a secured credit card company may not do that. The person must ask this question before applying for a secured credit card. Once someone establishes a credit history with a secured credit card, the next step can be to submit a credit card application, but it must offer a low annual fee and report to all three credit bureaus.
Step 3: Pay the Credit Card Bill in Full and On-Time Every Month.
People must pay their bills on time. This shows creditors that they handle the money that they borrow responsibly. Payment history is 35% of the person’s credit score, so people must not make late payments! It only requires that a person keep the account in good standing for six months, and then the person will have an established credit history and at least three credit scores.
It might be tempting to pay the minimum payment, but this isn’t the best plan. If people don’t allow themselves to pay the minimum payments, they will save a lot of money on interest. If people do not max their credit cards out, they will be better able to pay their bills in full every month. This also allows them to keep their credit utilization ratios under 30%, which is the best thing for their credit scores.
According to the experts at SoFi, each credit card application someone submits is a “hard inquiry,” and hard inquiries lower their credit scores. If the only credit card they apply for is a credit card with SoFi, they can get highly advantageous terms right now.
