فرزین افشار

Tips for Using Credit Builder loans to Improve Your Credit

Tips for Using Credit Builder loans to Improve Your Credit

You can mitigate these risks by making a budget that factors in your monthly payments before borrowing, and by shopping around for a lender that offers the most affordable loans possible. Some lenders will even refund the interest you pay as long as you pay back the loan on time.

As mentioned above, credit builder loans can help your credit – but they could also hurt it if you don’t make payments on time. If you’re taking out a credit builder loan to try to boost your score, these tips can help to ensure your efforts are successful:

  • Monitor your credit report to keep tabs on progress: If you check your credit once a month as you pay off your credit builder loan, you can make sure your positive payment history is being properly recorded. You can also check your credit score regularly to see that it’s climbing. This will help you to stay motivated.
  • Pay your credit builder loan on time, every time: It’s imperative that you are never late when you’re paying your credit builder loan as this late payment could cause your score to plummet – especially since you don’t have much of a positive credit history to offset it.
  • Pay off your loan in full by the balance due: You’ll also need to make sure you’ve budgeted enough to pay the full amount of the loan by the repayment deadline.

Other Ways to Improve Your Credit

While credit builder loans are one option to try to improve your credit, there are also other things that you should do to help raise your credit score. This includes:

  • Applying for a secured credit card:Secured credit cards work differently from credit builder loans. These cards give you a revolving line of credit, so you can borrow up to your credit limit, pay it off, and then charge more. With a secured card, you will usually put money equal to your credit limit in a special security deposit account with the creditor to secure or guarantee the loan. Your record of charges and on-time payments will be reported to the major credit bureaus. And, in some cases, your secured card can eventually turn into an unsecured card with responsible borrowing behavior.
  • Becoming an authorized user on someone else’s credit card: If you have someone in your life with good credit, they could help you to boost your score by adding you as an authorized user to one of their cards. This card would then show up on your credit report, even though you didn’t have to qualify for it with your own credit. You’d get the benefit of the positive payment history and the lengthy period of time the card has been open, which should boost your score.
  • Avoid borrowing too much: While you need to use credit to build credit, you don’t ever want to max out credit cards as this will adversely affect the credit utilization component of your credit score. A lower credit utilization ratio results in a better score because it shows you aren’t maxing out your cards and are behaving responsibly. You also don’t want to apply for too many new loans or credit cards all at once, as this results in too many inquiries on your credit report – which will also lower your score.

Bottom Line: Credit Builder Loans Can Help Boost Your Score – But Pick the Right One

When you are looking to improve your credit article source score, credit builder loans are an affordable way to do it. Don’t forget to also consider other options such as applying for a secured credit card so you have a mix of different kinds of credit. Make sure you shop around to find the most affordable credit builder loan when you’ve decided that taking out this type of loan is the right way to improve your score.

Leave a Comment