If you need a particular product or a service, but you don’t have enough cash to pay upfront, you can use a credit card to purchase it. But a credit card has what is called a credit limit.
What is a credit limit?
A credit limit is an utmost amount a credit company can lend you. Sometimes a product or a service is too expensive; even when you have your credit card, still you cannot buy it.
For example, suppose that you want to buy the latest smartphone, which costs $899. You don’t have sufficient cash to pay $899 immediately, so you want to use your credit card and pay the smartphone through credit installments. However, even though you have a card, you cannot purchase the smartphone because you’re credit limit is only $500.
What can you do to increase your credit limit?
increase your credit score.
Sounds simple right?
Hmm… if it’s simple why do so many people struggle to build credit then?
For them to become confident that you can pay your loans, credit card companies look at the credit history and credit score of a potential client before approving their credit application.
As you build your credit, your credit limit increases too. Continuing with the smartphone example, if you attain enough credit, your credit limit can rise to $1000, allowing you to buy the $899 latest phone.
Three key ideas to help you build credit:
Get a job
The first step in credit building is having a steady source of money to fund for your loan repayments. Having a stable and sustainable amount of income are two of the most surefire ways to successfully raise your credit. These are the two foundations upon which the subsequent tips rest upon.
Get a credit card and be a responsible cardholder
Owning a credit card and keeping it well maintained is one of the most efficient ways to build your credit. The technique is straightforward. You will only borrow money if you can repay it on time. Your good credit record will help your credit to increase undoubtedly.
Having a credit card is like killing two birds with one stone: it will allow you to buy the things that you want or need while building your credit—if you use it responsibly.
It is also worth noting that some credit card companies offer a special reward if you open an account with them. Make sure that you don’t miss this opportunity!
The Credit-builder loan primary purpose is to cater to the needs of people to build credit. It is usually offered by small scale financial organizations. You might want to check it out to see if it suits you.