Credit score are more than just getting extra credit. Today, consumer credit reports are being used by employers and landlords to decide if you’re right person for the job or that apartment or home. This makes having a good credit score more crucial than ever.
Unfortunately, you can’t get a good credit score instantly. According to Mike Sullivan, chief education officer at Take Charge America, a nonprofit credit, student loan and housing counseling firm, said that most people have a “thin file” or “no file”. But how can you build up your credit score if you to get that apartment or job without taking debt?
The question here is can you build credit without going to debt? The short answer to that question is “no”. Mike says that you need to take credit to build credit. This doesn’t usually mean that you should use a credit card. It can be an auto loan, a mortgage or personal loan. The problem arises when you’re trying to build up your credit score for the first time, as all the above mentioned items are almost impossible to get unless you’ve some sort of credit history.
Mike says the best way to build up credit if you don’t have any is to use a secured credit card. A secured card gets reported to the credit reporting agencies just like an unsecured credit card. This means that you can build credit without taking any debt, and you can’t spend more than you amount you deposited in the bank that issued you the card.
However, not all secured credit cards have the same benefits. Mike advised consumers to have their secured cards issued by an established financial institution. In fact, the bank you’re currently using might be best place to start your search for the perfect secured credit card. If your bank can give you one, then why bother looking for somewhere else.
Besides secured credit cards, there are other ways you can build credit without debt.
The biggest bill most folks have to pay each month is their rent. Sadly, this doesn’t get listed on your credit report most of the time. Jeff Golding, CEO of WilliamPaid, says that your rent won’t get reported to the credit bureaus, unless you rent from the top 50 landlords in your country. WilliamPaid is a company that lets anyone who pays rent in a way that gets it reported to the credit bureaus.
It makes a huge difference: Vantage Score is a competitor to the highly popular FICO score, which includes items like utility and rental payments. Jeff said that by using these kinds of payments 87% of people deemed unscoreable became scoreable.
This is especially good news for people who don’t have credit cards, and the utility bills can only get on your credit report, if your don’t pay you utilities for a long time, and goes into collections.
Consumers signing up for WilliamPaid services, require verification of their information from a landlord. After WilliamPaid receives the verification, they then report the monthly rent payments to Experian RentBureau, where you’ll see it in their credit reports. The service is available free of charge given that the same amount of rent is paid every month. It also people living in the same place to divide the bill with no additional fees.
The results can be striking: 40% of people with credit score below 600 or none get a credit score over 600 after they signed up for the service.
This service is an excellent way for recent college grads to build credit without getting any kind of credit cards.
Credit Vs. Debt?
Mike recommends people to avoid the former and using the latter. It’s important that you understand the difference about credit and debt. Debt is a long-term obligation, while credit is just access to cash, which you don’t have at the moment. Mike also advises people to keep this in mind and take credit for things they regularly buy. He said people should start off with a secured credit card, and then get a store and later a gas card. Make sure that you pay off your debts every month and never carry a balance, he added.