How to Build Credit While Living Paycheck to Paycheck
Money is tight and you feel like you’re just barely getting by. You’re wondering how you’re supposed to build your credit while you’re living paycheck to paycheck.
You’re not alone in feeling this way. In fact, it was recently reported that almost 80% of US Workers are currently living paycheck to paycheck. Even 10% of workers making six figures are still living this way.
However, the good news is you can build your credit, even on a limited income. This is something you should really work towards, as a better credit score means you can get a better rate on leasing a vehicle or getting a mortgage, which can be massive when you’re on a tight budget.
Here is how to do it.
Pay Your Bills on Time and With a Credit Card
If you want the opportunity to boost your credit score, there is a way to boost the payment history and
credit utilization portions of your credit score.
First of all, you should always pay your bills on time. This is the essence of the payment history portion, which is why it makes up about a third of your credit score.
But you may be able to take this a step further by using a credit card to make these bill payments and then pay your credit card balance down with your checking account right away.
This way, you’re making your bill payments on time every month and making timely payments on your credit card. At the same time, you’re helping your credit utilization numbers by using your available credit and quickly paying it down.
These two tactics may help you build your credit score faster than just paying your bills on time directly from your checking account.
No credit card because of damaged credit? No problem.
You may also carry out this strategy using a secure credit card, or unsecured personal line of credit. Your payments and your utilization may also be reported for both of those methods.
Also, the unsecured personal line of credit may come in handy as a financial safety net to prevent your budget from being derailed by unexpected emergency expenses. You can get more info at CreditFresh to see how an unsecured personal line of credit may help in an emergency,
Report Your Rent Payments
You should really be rewarded for paying what is most likely your biggest expense, your rent. Your rent payments are very rarely reported to credit agencies, as fewer than 1% of FICO reports contain any rent information.
However, you can pay a relatively small fee for a rent reporting service to work with your landlord to report your payments.
These services include:
Each service has its own price structure that usually includes a sign-up fee and a monthly fee after that. However, if you’ve got a major purchase on the horizon, paying one of these companies may be a good way to build your credit score faster.
Both of these tactics are simply more strategic ways of doing things that you were probably already striving to do. However, keep in mind that neither of these two strategies will work if you’re doing other things to hurt your credit elsewhere. This may include carrying a high balance on another credit card, or having other debts go into collections. Your credit score is a dynamic number that rewards you for doing all the right things, not just some of them.
Remember that building your credit doesn’t happen overnight. But, if you’re diligent and strategic, you will see the numbers grow much faster.