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How to Improve Your Credit Rating

How to Improve your Credit Rating

 
 
 

How to Start Building Your Credit

Patience may be a virtue, but when it comes to building your credit, it’s a necessity. Building credit takes time. Make sure to start before you really need it. Having a good rating is important if you’re going to apply for a credit card or loan. When you apply, credit card companies and lenders check your score and report to see a glimpse of how you’ve managed debt in the past. Have you paid your bills on time? Have you paid back your bills in full? How many other debts do you have active?

Not sure how your credit score ranks? Read this article here for more information on where your score ranks as well as what information is used to calculate your score. Having a higher score allows you access to better credit cards and loans. These tend to have a lower APR (Annual Percentage Rate), lower interest rates, and even better perks. Alternatively, people with a lower score may find that they are often denied for loans and credit cards; and that the ones they are approved for have less favorable rates, costing them more in the long run.  If you know your score is not high enough for a specific loan or card, you should avoid randomly applying for it and having them check your credit. Hard checks on your credit can take 10-20 points off of your score.

If you want to have access to better auto loans, mortgages, and credit cards in the future, then you need to start building today. Thankfully, there’s a number of different ways to build (or improve) your credit!

 

Open a Card to Increase Your Credit 

When managed properly, credit cards can be a great tool to build your credit. It can help show that you are responsible and can be relied on to pay back your debts. If you have little or low credit history, look for a card with a lower spending limit since qualifying for these cards is usually easier.

If you mismanage your credit card, you could easily fall into debt and hurt your score. When you are late to pay your credit card, you will owe even more money, and your score will lower. The additional money that you owe will be based on your card’s APR. You can avoid this. Once you’re approved for a card, use it to make some of your regular purchases like gas or groceries. Credit card purchases should be treated as a bill, not as additional money. Always make sure that the purchases are small, and that you can easily pay them off right away. Make sure to pay it off in full every month. Be responsible with your credit card, and keep a close eye on your receipts, credit card statement, and bank account to make sure that you don’t purchase more than you can pay.

 

Easily Open a Secured Card to Increase Your Credit Score

A secured credit card is one that is tied to your savings account. The card limit is typically a fraction of the money in the bank account. This type of credit card is great for people with little history or negative history. Beyond being tied to your bank account, and the lower card limit, secured credit cards are very similar to regular credit cards. You still need to make sure you’re using the card responsibly and paying off the bill on time each month.

Before opening a secure credit card, be sure to check with the card lender to find out if they report your credit history. Not all secured credit card companies will impact your credit history. If you’re trying to build credit, you want a card lender that will report your responsible behavior.

 

Open a Joint Account or Become an Authorized User to Increase Your Credit Rating

If you’re fortunate enough to have a family member that is comfortable with you joining their own account, you can find that you have the ability to build your score faster. You could become an authorized user on someone else’s account, or you could open a new joint account with someone with a better credit history.

Not everyone will be comfortable with having you join their account. Since both users are responsible for repaying the charges of the card, both users could be hurt if one person doesn’t repay the borrowed money. The other user may become liable for your purchases. If no one pays the credit card bill, you may both take a critical hit to your credit score. The Simple Dollar has more information on the differences between adding authorized users and opening a joint account, as well as the pros and cons of using both.

Consider becoming a user on a card that you don’t have access to. This helps you avoid temptation entirely from spending the card. You just have to be sure that the other person who does have the card has a history of being responsible about their purchases.

 

Pay off Your Current Loans for a Quick Boost in Your Credit

If you have an auto loan, mortgage, or school loan, you’ll want to be sure you’re making regular on-time payments. These loans are all monitored and report your credit with them. School loans are common. Almost everyone who went to college has at least some form of student loan debt.

Auto loans are one of the easiest types of loans to obtain. They also tend to have high interest rates and difficult terms, so they also tend to be one of the most difficult loans to have. When buying a car, you must shop for both a reliable car as well as an auto loan. Having a lower interest rate on your auto loan can put you in a stronger negotiating position when purchasing the car. Of course, there are tons of auto loans out there. NerdWallet has collected a list of auto loans for people with good, fair, and bad credit.

 

Avoid Identity Theft by Keeping Your Information Secure

According to one study, about one out of three people will experience identity theft. With identity theft, someone could drain your checking and savings accounts, as well as lower your score by taking out credit cards and loans in your name. There are steps you can take to improve your chances of avoiding identity theft.

Set up transaction alerts for all of your bank accounts and credit cards so that you’ll be notified any time a transaction takes place. You can also use services that monitor your credit; Credit Karma offers this service for free. Be cautious who you give your personal information to and never respond to unsolicited requests. Avoid clicking dangerous links by hovering your mouse over a link in order to see the destination URL, and never use or access your sensitive information while on public Wi-Fi. Shred unneeded documents that include your personal information and cut up closed credit cards. Keep your social security card in a safe place where you won’t lose it, or have it stolen. Create strong passwords by using different ones across multiple websites. Check your score about once every four months and dispute any concerns you notice. Our other article on frequently asked credit score questions has more information on checking your credit and reporting incorrect transactions. You can also find more information on avoiding identity theft by clicking here

 

Pay Your Other Bills on Time to Show Credit Bureaus That You're Responsible

Do you have a history of paying your utility and cellphone bills on time? Some credit bureaus will allow you to connect your bank accounts to identify your payment history. Previously the only way that utilities could affect your score was in a negative way. Unpaid utility bills that you defaulted on could be taken to a collection agency, thus lowering your score. Today, Experian offers Experian Boost to help you include your monthly bills in your score. This tool will only affect your Experian credit report, so your Equifax and TransUnion credit reports will not change. However, the Experian Boost does affect the credit scores that lenders tend to use, including the base FICO Score.

 

Bad scores happen. Most people have some sort of rough period in their life. They may have made a mistake, or even just had some bad luck. Regardless, they want to grow and improve their credit score now. If you have a low score, there’s no reason to feel ashamed. You’re not alone. According to one study, about 1/3 of Americans have a credit score that is below 601. You should still work to improve your score.

In the meantime, if you’re having trouble getting approved for a loan, and need a small loan now, a payday loan may be an option for you. Generally speaking, pay day loans will not affect your score. The exception to this is when the pay day loan isn’t paid back. If you fail to pay back your loan, your balance may be turned over to a third-party collection agency, who would then make the decision to impact your score. Still confused? Please read our article here for more information about how payday loans may affect your credit score.

The good news though is that we do not require a credit check for our payday loans! We’re here to simply provide financial relief to those who need it. We know life happens, so regardless of your credit history, if you need a small loan now, you can apply here for a Net Pay Advance loan!

 

 

Sunday, September 29, 2019
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