It seems like a crazy idea, but the key to getting a better credit line is going to be obtaining a loan- even if you don’t need it. It seems like it might be counter-productive to one’s debt, but obtaining another loan is the best way to increase one’s credit- provided that they can indeed pay it back each month on time.
Even with a poor credit history, there are ways to get an improved score and better financing. Getting a personal loan for simple reasons, perhaps for buying that new plasma screen TV, will build credit while still being able to enjoy the process of building credit. Of course, one could actually never spend the money and keep it for repayment- this is completely up to the borrower.
A simple process of paying back a loan on time or even paying for things with credit is going to increase credit where credit is due. It will typically take a few months to a couple of years to build a good amount of credit this way, depending on how far one wants to take the process and what their previous credit score was.
A great example of where these tactics would come in handy is in the first-time buying experience of a home, duplex, or even an apartment. Lenders will charge as much as 25% or more simply for the lack of credit that a borrower may have. Obviously if the consumer had worked on building their credit up to that point, they could very likely get away with 10% or smaller interest rates.
Sadly, it is going to be tough for younger adults to find relief among other less expensive means. However, having a good history of paying bills and staying out of debt will ensure that interest rates aren’t inflated even further as a result of slightly bad credit. Often if one can show that they have had a high income each and every month, and savings to show that they are good savers, financers will give small breaks here and there as a result.
If a first-time buyer of a home or automotive doesn’t have the best credit built up just yet, they can still do without a new home or vehicle for a little while longer while they amass a higher down payment. Having a higher down payment will often lower interest rates, and also shorten the term of the loan to make the interest rates less appalling on one’s bank account.
Final Thoughts
The best bet from here on out is to consult the bank in which one does business- they will usually give the best rates since they know the history of the consumer quite well. And, as always, waiting for a larger down payment or to build credit is always an option for jumping into the financial ring.
