3 Ways to Build Credit in the US
Credit is a crucial aspect of financial life in the US. International recruitment companies who are opening and operating in the US should immediately begin building and maintaining credit in the states.
What is a credit score?
A credit score is a numerical representation of a person’s creditworthiness and is used by lenders to determine their level of risk when lending money.
A credit score is commonly referred to as a FICO score. A FICO score is a type of credit scoring model used throughout the US. Different reporting agencies may weigh certain factors slightly differently when determining FICO scores, but it is essentially measuring the same thing as a credit score, which is how likely a consumer is to repay borrowed money based on their credit history. Most lenders in the US utilize an individual’s FICO score to make lending decisions.
Why is it important to have good credit in the US?
A good credit score is important in the US because it can impact an individual’s ability to access credit, the interest rates offered on loans and cards, and the cost of insurance premiums.
Let’s dive deeper into some of the top reasons to have good credit in the US:
- Access to loans and credit cards: Having a good credit score makes it easier to get approved for loans and credit cards in the US. Lenders are more likely to approve applicants with good scores because they are seen as less of a risk. This means that you’ll have more options when it comes to borrowing money and making purchases. A higher personal credit score can also help your US business secure funding.
- Better interest rates: Individuals with good credit scores often receive better interest rates on loans and credit cards. A lender will have more confidence that an individual with a higher score will make payments on time. A better interest rate can save you thousands of dollars in interest over the life of a loan.
- Renting an apartment: A good credit score can also be important when renting an apartment or a home in the US. Landlords often check credit scores to determine whether a tenant can afford rent and be trusted to pay on time.
- Insurance rates: Some insurance companies use credit scores to determine whether to approve an individual’s application and what rates to offer. Individuals with good credit scores are often able to get lower insurance rates in the US.
3 ways to build and maintain credit in the US
Maintaining a good credit score is an important part of managing your finances and creating a successful, secure financial future in the US.
Building a credit score in the US can take time, but here are 3 ways to do so effectively:
- Pay your bills on time: Late payments can have a negative impact on your credit score; not to mention the late fees and mounting interest that can potentially harm your financial health in the long run. It’s important to make all your required payments on time, every time, to keep a good score.
- Keep your card balances low: Credit utilization has a significant impact on your score. High credit card balances can indicate to lenders that you are overextended and may not be able to make your payments. If you’re trying to boost your credit score, it’s a good idea to keep debts on your card as low as possible.
- Limit the number of hard inquiries: A hard inquiry occurs when a lender requests your credit score to determine how much risk you pose as a borrower. This can occur when you apply for a new line of credit. Too many hard inquiries can have a negative impact on your score.
The benefits of a secured credit card
One tip for building credit as quickly as possible is to get a secured credit card. A secured credit card is backed by a security deposit. The security deposit acts as collateral, which helps reduce a lender’s risk. Secured cards are great for individuals who are looking to build or improve their credit history.
Unlike traditional credit cards, a secured card does not require a credit check. This makes it easier for individuals with no US credit history to get approved and start building their credit.
Secured cards offer the same convenience and flexibility in the US as a traditional credit card; allowing for online bill pay, cash withdrawals at ATM’s and more.
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Disclaimer: This post is provided for informational purposes and should not be considered legal advice, the final word on this topic or a political opinion.