How to Build Credit Without an Income

The Credit Card Act of 2009 has made it difficult for non-working adults to get their own credit cards as the law limits access to credit to people who have an independent source of income. If you already have a card, no job won’t affect it, but getting a new card or a mortgage could be a lot more difficult. There are ways to get around this, however. 

1. Get a branded card.

Form a positive credit line with a card from a company you shop at a lot. These cards are easier to get than regular credit cards because they have a lower limit, but they still help you build your credit score. 

2. Become an authorized user on your spouse’s account.

Credit card companies can then see if you pay your bill on time and if you regularly keep a low debt-to-credit ratio. 

3. Get a secure credit card.

These cards need an upfront deposit in cash, and you can’t spend more than what you deposited. For example, if you want $2,000 in credit, you have to deposit $2,000. Card companies such as Discover and Capital One offer popular secured card offerings. However, make sure that the card has a low annual fee and that the card company issues reports so you're building credit. Some cards will even let you convert the card to a regular credit card if you made a number of payments on-time. This can also help your credit rating, however, and help you get a new card later. 

If you already possess a credit card or have a secured credit card, you need to be aware of your credit utilization ratio. The amount of open credit that you use affects your credit score, so make sure that you keep the amount low and pay it off entirely each month. The biggest and most important factor is that paying your bills on time each month as payment history makes up a larger percentage of your credit score. 

https://www.realsimple.com/work-life/money/money-planning/how-to-get-credit

Six Tips To Help You Raise Your Credit Score

A credit score is a three-digit number with the capacity to improve or derail our entire financial well-being. A high credit score can help you get lower interest rates and more perks, whereas a low score can prevent you from purchasing a car, renting an apartment, and living your life.  Here are six tips to help you improve your credit score today.

Pay Your Bills On Time

 This tip is a no brainer! Paying your bills on time is crucial to maintaining and even improving your credit score. Payment history comprises 35% of your credit score, making it a significant chunk of your report. Continually paying bills on time shows the credit card company that you’re reliable. If you’re just beginning to build your credit, messing up one payment could hurt you in the future and prevent you from successfully applying for new credit cards.

According to Experian, a missed payment could stay on your report for up to seven years. That’s a long time for someone just starting out.  The best way to ensure you pay on time is by setting up reminders on your phone. Many credit card companies even offer auto-pay options which allow you to link a bank account so you never miss a payment.

Debt Consolidation

 Paying off the debts you have is crucial to improving your credit score. Debt consolidation, the process of moving all your debts into one loan is one of the best ways to do this. While this will cause an initial drop, your score will improve as you pay off your loan. It might also help you get a lower interest rate which can help you pay off the loan quicker.

Don’t Max Out Your Card

Remember the 30% rule? This is important in preventing a credit score drop. Experts suggest using only 30% or less of your credit limit per month to maintain a good, very good or excellent standing. Even if you don’t go over your credit limit completely, spending more than 30% of your available credit line makes you look risky to the lender. These drops are typically only temporary and spending less the next month can help improve your score.

Keep Card Applications to a Minimum

 With so many credit card options with unique perks and cashback options, it might seem tempting to apply for a new credit card. However, applying for too many credit cards can actually significantly affect your credit score. Whenever you apply for a card, the company will pull a hard credit inquiry, which showcases your entire credit history, including payments, loans, and debt. Every time a company pulls a report, it could cost you a couple of points. Nonetheless, applying to too many cards within a few months, although it may help improve your credit mix, looks risky to lenders. WalletHub recommends applying for a credit card only once a year.

Keep Unused Cards

Even if you have a credit card you rarely use, keeping it open can actually benefit you in the long run. Credit mix -- how many accounts you have open -- accounts for about 10% of your FICO score. Unless the card costs you money, it’s smart to keep the card open because when you close an account you reduce the amount of available credit you have and the percent that you use. This could potentially lower your score, even if you are spending the same as before. Moreover, when you close an account you lose your credit history which can be crucial if you close a card you’ve had for more than 10 years. The longer the credit history, the better you look to your lenders.

Check Your Reports

 Credit card companies occasionally make mistakes, so it might be smart to regularly take a look. According to the Fair Credit Reporting Act, you’re allowed a free copy of your credit report once a year from each of the three major bureaus -- Experian, Equifax, and TransUnion. You can access this free credit report by visiting annualcreditreport.com or by filling out a form and sending it by mail.

You can also receive a free credit report if a company denied you a credit card, insurance or even employment. According to the Federal Trade Commission, you can ask for the report within 60 days of receiving your notice. If you find an issue with your credit report you can file a dispute. This will typically require you to send a letter in writing explaining the inaccuracy, and the company will typically have 30 days to investigate. FTC has some tips and even a sample dispute letter on its website.

Keep in mind that there’s no easy fix to a bad credit score. While missed payments, hard credit inquiries, and card cancellations can negatively affect your score, following these tips will help over time. Patience is key!

Resources:

https://www.experian.com/blogs/ask-experian/credit-education/improving-credit/improve-credit-score/

https://wallethub.com/answers/cc/how-often-should-you-apply-for-a-credit-card-2140660693/#:~:text=WalletHub%2C%20Financial%20Company&text=It's%20best%20to%20apply%20for,will%20hurt%20your%20credit%20score.

https://www.consumer.ftc.gov/articles/0151-disputing-errors-credit-reports

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