Business is slow, so your manager decided to cut your hours. To help cover bills until business picked back up, you applied for a personal loan. Unfortunately, you couldn’t get approved because you have minimal credit history. So, you looked into credit cards and decided they weren’t for you. But do you have any other options? Of course you do! Read on to learn more.
1. Credit Builder Loan
Some community banks and credit unions offer credit builder loans. There are two options to choose from:
Secured credit builder loans: the loan is equal to the amount deposited in a savings account. The account serves as collateral and protects the lender if you default on the loan.
Unsecured: a cash deposit is not required, but the lender will check your credit and verify income. If approved, the proceeds will be available for use right away.
The lender will report account activity for both types of loans to the credit bureaus. Since payment history accounts for 35 percent of your credit score, making timely payments is a surefire way to boost your credit score in record time.
Can’t find a community bank or credit union that offers credit builder loans? Consider an online option, like Payoff.com
2. Student Loan
Are you currently enrolled in an institute of higher learning? Consider taking out a small student loan to build your credit score. (Compare New Student Loans). Even if you don’t need the funds, you can park them in a savings account and make payments to help increase your score.
3. Ask Your Service Providers to Report Account Activity
Call your utility providers and ask them to report account activity to the credit bureaus. They are not obligated to fulfill your request, but it doesn’t hurt to ask. This tactic may also work with your landlord (if you rent), cable and cell phone provider.
4. Become an Authorized User
Do you have a friend or relative that responsibly manages their credit cards? Request that they add you as an authorized user. You’ll have access to the credit line and benefit from their payment history. But you’re not obligated to use the card. And should the primary cardholder mismanage the account, you can be removed from the account. Even better, you won’t be on the hook for the outstanding balance on the card.
5. Apply for a Personal Loan
How’s your relationship with your bank? Assuming you’ve been a good customer for the past few years, they may be willing to approve you for a small, unsecured personal loan. Similar to credit builder loans, timely payments will build credit history while showing future creditors you can manage your debt. If you’d rather consider private lending options then here’s our recommendations. (Compare Personal Loans).
6. Consider Peer-to-Peer Lending Networks
Peer-to-peer marketplaces like, Prosper.com will connect you with private investors that extend loans to individuals from all backgrounds. Loan activity is also reported to credit bureaus and the qualification criterion are a bit laxer than what you’d find at traditional financial institutions.
7. Bonus Tip: Check Your Credit
Did you know that 20% of credit reports contain errors? Before embarking on this journey to build credit, it’s worthwhile to retrieve a copy of your credit report. You can visit AnnualCreditReport.com to get started. And if you find any discrepancies, immediately file disputes as these items could be dragging down your credit score.
Written By: Allison Martin
Writer For: Easy.Credit