How to Increase Your Loan – or Create One From Scratch

Your credit rating will change not only because the calendar turned upside down for 2021, but at the same time, the beginning of the new year is a good time to think and plan some financial moves that will improve your credit rating.

Why Your Credit Rating Matters

Your credit rating is a measure of your creditworthiness, and a low score means you are at a higher risk of default on your loan. The good news is that there are several keyboard shortcuts that can boost your score over the course of several months. And if you don’t have any credit at all – let’s say you’re a teenager about to go to college – you should focus on building a credit history from scratch.

Pay on time

This is the easiest and most profitable step you can take, especially if you can afford to make payments but have sometimes forgotten to do so in the past. Paying only the minimum is ok if that’s all you can do, but just make sure the payment is on time. When I received my first credit card, I made the mistake of periodically dumping money in my account balance with only a vague idea of ​​the due date, simply because I did not fully understand how late payments would hurt my credit standing.

Don’t close old credit cards unnecessarily

This advice may sound confusing, as having multiple credit cards may mean that you are at risk of using too much credit. And it’s true – if you exceed your credit limit on these cards, it can lower your credit score. But the key point to consider before closing a card is the use of your credit, which is a measure of how much credit you are actually using from the amount your lender has given you. In an ideal world, using 1% of your loan at any given time is ideal, although keeping it below 30% is a good rule of thumb.

For this reason, if you have a card that you no longer use, you can leave it open to use credit, especially if it is an old card (since a long credit history also gives you a slight increase in your overall credit rating).

Don’t issue multiple credit cards at once

Relevant to the point above: While you want to take advantage of the credit, don’t sign up for multiple credit cards at once. Lenders get nervous when they see this and it can affect your credit rating. Better to postpone your new bills – leave at least 90 days between applying for the card. Read more about unlocking new cards in this Lifehacker post .

Report your rental payments

A good history of timely rental payments can quickly increase your credit, but there is a problem – many landlords do not report your rent payments to the credit bureaus. You can ask your landlord if they report these payments, or if not, sign up for a rental reporting service as detailed in this Nerdwallet post .

Get a co-author for your loans

If your parent or partner has a solid credit history, you can use their credit score by adding them as a co-signer so you can qualify for a credit card or loan that would otherwise be unattainable. However, this is not an easy step (for either party) as any authorized user will be on the hook if payments are not made .

Get a low limit credit card or secured credit card

Low-limit cards are easier to obtain , making it easier to get a loan. Parents may consider signing their child a low-limit credit card so they can start building a credit history. If you’re worried about them buying things they can’t afford, just hold the card for them – at least until they’re ready to take responsibility.

Meanwhile, a secured credit card works just like any other credit card, with one exception – the credit card company requires you to post a security deposit, usually $ 300 to $ 500. This secured deposit serves as collateral to let the lenders know that you will repay the money you borrowed. It’s almost not a credit card in a way, but again, it’s a good place to start, especially if your credit score is too low to qualify for a regular credit card.

This post was originally published in 2017 and was updated on January 5, 2021 to add new information and align with Lifehacker’s style guidelines.

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