Most people use the terms ‘building credit’ and ‘improving credit’ interchangeably; however, they aren’t quite the same. In fact, they’re quite different from each other and require different approaches.
This makes it important for us to learn the differences between them to ensure that we’re on the right track with regard to our credit history. Here’s all you need to know about building credit and improving credit.
Building vs. rebuilding credit: what’s the difference?
The Primary Difference
The main purpose of having a credit history is to provide creditors with a way to predict how likely you are to settle your debts.
Building credit is the process of creating a credit history from scratch. It means that an individual has no previous credit history report and that they’ll have to take steps to start the credit building process.
Improving credit, on the other hand, requires an individual to rebuild their credit ratings. Unlike people with no credit history, an individual who’s looking to improve their credit has a prior credit report with a poor credit score.
Simply stating, building credit means that you don’t have a credit record to begin with and improving credit means you have a poor credit record that you want to improve.
The process of building credit involves using a secured credit card or loan, a co-signer credit card, or assuming an authorized user status on someone else’s credit card—among other similar techniques—to build your credit rating. Moreover, there are credit-builder loans available which can help a person to build a credit history from scratch without upfront cash.
Of course, you’ll need to pay your bills on time to ensure that you’re off to a good start. Since you’re starting off with a clean slate, you can’t afford to have any major blemishes on your credit history. Remember, it can be harder to improve your score when you start with bad credit.
If you’re looking to improve your credit, it means you already have an established credit history; therefore, your focus should be on taking actions that show a positive payment pattern and reflect positively on your credit history. Obviously, your first priority should be ensuring that you’re paying your debts on time.
However, there are several other strategies that you can make use of, such as diversifying your credit to show that you have the ability to handle multiple credit lines at the same time or perhaps by settling outstanding loans. Moreover, keeping a low credit card balance and debt-to-credit ratio can also help in improving the credit card balance.
Certainly, there’s no better alternative than getting your credit reports reviewed by a professional and receiving a personalized solution to improve your credit ratings.
If you’re looking for a credit repair consultant who can provide you a customized solution to help you build stronger credit ratings, contact Master Credit Consultants.
Based in Spartanburg, South Carolina; we’re an established consulting firm that offers credit restoration services; helping our clients to achieve their credit goals and maintain healthy credit ratings for a long-term period.
To schedule a free consultation, give us a call at 1-844-620-8796 or visit our website for more information.