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Every individual’s credit report starts as a tabula rasa or blank slate, hence, the trick is to gradually build good credit within the shortest span of time possible. Possessing a good credit history is an integral part of being able to apply for emergency loans or quick cash loans. With the right strategy, this process can be sped up – let’s look at some ways in which one can master the art of building credit from scratch. 

No One Starts From Absolute Zero

A common myth that pervades that credit scores begin at 0 – however, most credit models, including the FICO scoring model, are scaled on a range between 300 to 850. Next, you would like to know: how your credit score calculated? Credit scores generated on the basis of your financial data, which include bill repayments, outstanding debts, credit card bills, and so on. 

The Art of Building a Good Credit Score 

Once you’re eligible to earn credit scores, start adding items to the report that can be deemed as scorable. How can you start establishing credit? While this can be challenging for first-timers, as lenders hesitate to do business with fresh starters, it is not impossible! One can implement the following strategies for establishing a good credit score:

Avail Secured Credit Cards

One of the most effective ways to build credit from scratch or even rebuild damaged credit is to avail a secured credit card. This potentially represents a minimal risk for the lender. As you required to place a deposit with the issuing bank equal to the amount of your credit limit. For instance, if you deposit Rs. 5,000, you issued a card with a limit of Rs. 5,000.

Secured credit cards easily approved by lenders, and banks are ready to take a risk. And issue an account to those with no previous credit history. However, once you do so, make sure to manage your account efficiently. By ensuring no late payments and timely repayments on a monthly basis. 

Credit Builder Loans

Credit builder loans generally issued by credit unions and can serve as a way to qualify for an installment line of credit. Certain credit scoring models reward customers who are able to display a history of managing various accounts in an efficient manner. With this option, one can avail of a small loan amount. However, the funds may not be released to you immediately. Instead, the amount will be held by the credit union in a savings account. And once your interest and loan repayments done, you can access that amount.  

Authorized User Accounts

Authorized user accounts allow you to be added by a family member to an existing credit card account as an authorized user. As long as the account in question holds a good repayment history and a low balance. The card will start you out with a relatively good score. As it is added to your credit report by the issuing bank. 

Once you’ve facilitated a good credit score, you need to work towards maintaining and facilitating its growth. It is fairly easy to maintain solid credit scores if one adheres to two golden principles: 1. Never miss a payment and 2. Maintain low or no credit card balances. A string of injudicious decisions can lead you straight into a debt trap and damage your credit score. Utilizing a reputable credit monitoring service can help you stay on top of your credit score should this happen.

In order to avoid that, it is crucial to avail loan amounts in conjunction with one’s repayment capacity. One also needs to educate themselves more about credit scores and the intricacies of loan repayment. This will help them make better and more informed financial decisions on a long-term basis.