A brief list of credit building tools and their descriptions.
The tools detailed below, if used responsibly, can help gradually improve your credit scores and worthiness as a borrower.
- A secured credit card is backed by a payment used as collateral on the account. It typically requires a refundable deposit in exchange for a line of credit.
- An installment loan is repaid in equal increments with a set number of scheduled payments. Accessing a small loan and making the payments is a great way to transition to greater amounts in the future.
- A secured line of credit (LOC) is backed by a secured payment used as collateral on the account. The LOC is extended to you; essentially, allowing you to borrow money from yourself. You will be assessed an interest rate, but recording positive history on your credit is a great benefit.
Tip: Payment history for all 3 typically begins reporting on your credit within 30 days of approval.