What is one step to building personal credit?
To help you build personal credit, we asked business leaders and finance professionals this question for their best insights. From taking out a credit builder loan to keeping balances low, there are several tips that may help you build personal credit with the goal of financing equipment for your business.
Here are six ways to build personal credit:
- Take Out a Credit Builder Loan
- Establish Business Credit
- Pay Your Bills On Time
- Turn to the Nerds
- Sign Up for a Secured Credit Card
- Keep Balances Low
Take Out a Credit Builder Loan
These are small loans offered mainly by credit unions which can help you build up your credit without putting you at risk of being in massive debt. Most loans of this time range from a few hundred to a thousand dollars. The loans are deposited into an account held by the lender. You make payments over a fixed period of time to pay it back. You’ll pay a fixed amount each month over a period of time, and once you’re fully paid off, you gain access to the funds.
All payments you make on this loan are reported to credit bureaus, helping to build your credit. As an added benefit, you’ll have created a reservoir of savings while working to build your credit, an easy two-for-one. Credit builder loans are great for establishing new credit or improving a flagging credit score.
Boye Fajinmi, TheFutureParty
Establish Business Credit
The first step to building personal credit with the goal of financing equipment for your business is to establish business credit. This can be done by borrowing money from a lender and using it to purchase equipment for your business. You will need to show the lender that you have the ability to repay the loan in order to qualify for the loan.
According to small-business lender BlueVine, borrowers typically qualify if they have at least one year in business, $100,000 or more in annual revenue, and a credit score no lower than 550 to 600.
Jaymee Messler, The Gaming Society
Pay Your Bills On Time
Probably the most key way to build out your credit for future business endeavors is to pay your bills on time. This is most likely advice you have heard before, but it is seriously the best way to improve your credit successfully. Credit card, rent, utility, and other payments should be budgeted out at the beginning of each month so that you can stay on track with your expenses and be able to pay off these bills.
Riley Adams, CPA, Young and the Invested
Turn to the Nerds
There are companies built on the service of providing smart credit card decisions. NerdWallet is the obvious example, but others offer similar services (Experian, Credit Karma, etc.). Lean forward into those available services. Go find the best credit cards based on your budget and credit history. If you’re a fledgling business, you don’t want to overpay on interest and fees. Follow the best recommendations and then start purchasing the equipment you need the most. Do it piecemeal, otherwise your credit rating will suffer and you will find yourself buried under insurmountable debt. Make smart money moves.
Alan Ahdoot, Adamson Ahdoot Law
Sign Up for a Secured Credit Card
Secured credit cards are ideal for people who have limited or no credit history. They require an upfront deposit that acts as your credit limit. You can start building positive credit history with a secured card and transition to an unsecured card when you have a higher credit limit or have maxed out your secured card.
Sophia Gimor, Stream Digitally
Keep Balances Low
The first and most crucial step to building personal credit is to keep balances low and establish a good credit history. This means making all of your payments on time, keeping your balances low, and using credit responsibly. By doing this, you will create a solid foundation for future borrowing. Once you have established a good credit history, you can start working on getting other lines of credit, such as a personal loan or business loan. By making all of your payments on time and maintaining a good credit score, you will eventually be able to qualify for the equipment financing you need.
Gino Louise Reichert, LSAT Prep Hero