How to Improve Your Credit Report in Just a Few Months

7 December 2016
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Buying a house is contingent on having a good enough credit report. If you are just starting out in life or haven't built up any good credit, you'll need to work hard at improving your credit rating. It's important, however, to understand that this is more than just a number. Potential creditors and lenders will also look at how well you've handled payments in the past, particularly installment payments. If you don't have any installment payments to make, then there's no way for them to tell what kind of risk you are to them. Here are several ways you can improve your chances of securing a mortgage. 

Report your rent payments

If you rent, that is one payment that can be considered as an installment payment. Unfortunately, it typically does not get reported to the credit bureaus. However, there are companies that will report your rent payments, after they verify with your landlord that you make your rent payments on time. They will contact your landlord on a monthly basis, so it's a good idea to let him or her know beforehand. By having this monthly payment reported to the credit bureaus, you can expect your credit rating to go up. Conversely, paying late can negatively affect your rating.

Ask your bank for an installment loan

Go to your bank and ask them for a signature installment loan. This is a type of loan that does not have collateral attached to it. To better your odds of securing this type of loan, tell the loan officer that you will put the money into a separate account that you cannot withdraw money from. The bank can set up automatic payments to be withdrawn from the account each month when the payment is due. You will need to put additional monies into the account to cover the interest. 

Get a secured credit card

A secured credit card is one that you deposit money into. Depending on your current credit rating, this amount could become the spending limit on the card. Sometimes, credit card companies will increase your spending limit beyond the initial deposit, whether immediately or after several months of paying your balances on time. It's important to only use a small amount of credit each month, because potential creditors will look at that data as well. They don't want to see someone using all of their available credit. You want to keep your purchases using the credit card to a minimal and pay the full balance each month. 

Get auto financing

Paying monthly car payments will also be a way to show your potential creditors that you handle debt responsibly and pay your bills on time. With no credit or bad credit, it can be difficult to get auto financing. Fortunately, there are dealerships that can finance people in your situation on the spot. They are typically known as buy-here-pay-here auto lots. Before you get quick qualify auto financing, be sure to ask the dealership if they report payments to the credit bureaus. Some will only report late payments or repossessions.

Pay everything on time, every time

With these various types of payment arrangements being reported to the credit bureaus, you will need to make sure to pay everything on time, every time, without fail. Take a look at your finances and make sure the payments you'll be making will be evenly spaced throughout your pay periods. If not, ask creditor(s) if they can change your due date(s) so they are spread evenly between pay periods. That way, you won't be overwhelmed with most or all of your payments coming due within the same time frame.