I know you face may look like Shaq when I tell you the answer to this question. The question being “Is it possible to build your credit score with a low income?” The answer is….. ABSOLUTELY!!! With credit scores and reports, one factor that has no affect on it is your personal income. That’s right! Regardless of income, you can have a high or low credit score. Of course, it would seem easier to build credit with a higher income as you can afford the payments and such, but you can also build it with a lower income. Let me explain how.
1. Getting A Credit Card
Getting a Credit Card is the easiest way to build your credit score. Why? It’s really quite simple. With a credit card, you can swipe the card for everyday purchases like gas, groceries, and lunch. I say everyday purchases because these are items that with or without a credit card, you would pay for anyway. With swiping the credit card for those items instead of cash, keeping a low balance, and making the payments every month in full, it’s only a matter of time before your credit score rises! There are plenty of credit cards that are specifically for people who may not have the best credit due to a low income and a few late payments.
2. Becoming An Authorized User On Someone Elses Great Credit
Everyone knows that person in the family who has the great credit score. They didn’t just wake up with great credit. They created healthy credit building habits such as: Paying bills on time, keeping low credit card balances, keeping accounts open, and maintaining multiple accounts with high limits. These types of people are going to keep doing what they have been doing as they know it helps keep their credit score high. If you know someone like this, call them ASAP and see if they are willing to add you to one of their credit cards as an Authorized User. This means that you will receive future payment history and all account changes on your credit report every month that the primary account holder does every month. Having a card of your own that is attached to this account is optional, but the key is not to focus on having a card attached. The key is make sure that they are practicing those good habits while you are on the account. This is increase your credit score like crazy and the best part is you never have to worry about paying the bill or anything. Be sure to choose the right family member or friend as their negative activity will show on your report as well. If they are late on a payment, go over their limit, or keep a high balance, your score will be affected negatively as well. Proceed with caution.
3. Getting A Retail Credit Card
Retail Credit Cards are really easy and simple to get approved for as well. The cashier will be sure to ask you at your local Target, Wal-Mart, JCP, Kohls, Best Buy, and every other business in your neighborhood. These credit cards are easy to get because they usually give you a discount on items you would normally purchase with our without a credit card. On top of that, these credit cards really don’t require a lengthy credit history or high credit score. Be sure to keep the balance low and never go over the limit.
4. Get An Auto Loan or Personal Loan
This is an option to go but keep in mind, with a low income, your interest rate on these types of loans will be high. This means you will have high payments and more than likely pay double the amount of the loan over time. Why is this an option? Well, depending on your credit situation and whether you are in the market for an auto loan or personal loan, you will be able to quickly increase your credit score. I recommend refinancing as soon as you can once your score has increased to lower your interest rate and payment.
The Bottom Line
As you can see, there are a few ways to build a credit score with a low income. These steps are fairly easy to accomplish and will require some discipline once the account has been opened. Be sure to consult with a Certified FICO Professional if you have any questions.