5 Ways to Look Beyond Your Credit Score to Build Financial Stability

Nearly 30 million Americans are considered invisible credit, which means they have no credit scores or recent credit history. More than 60 million are considered light files, having less than five credit accounts to their name. And about 30% of US consumers who have active credit records are subprime, with credit scores below 620.

People in these categories start from the back when applying for a loan, housing, or even a job. If you’re one of them, you need to look beyond your credit score to find opportunities to establish financial stability. Start here.

1. Make sure rent and utility payments count towards your credit score

You pay your electricity, water, cable and rent on time each month. Good for your credit score, right? Not always. Many utilities do not report payment history to credit reporting agencies, so these payments are often invisible.

You have options to make sure they are not invisible on your credit file. A simple step you can take is to use a service to report your payments. Some options for reporting your rent payments include Experian Boost and Rental Kharma. Some of these services only send your data to one or two credit bureaus. So you’ll want to compare your options and make sure anyone checking your credit asks the office who knows your rent payments.

These services are not guaranteed to improve your credit score, but they may increase users’ FICO scores. It’s worth taking the time to see which service will benefit you the most.

2. Use alternative credit data to improve your creditworthiness

If you are dark credit, light file, or new to the United States and have no credit history here, find lenders who use alternative credit data when evaluating credit applications.

Examples of alternative credit data include payslips, transaction templates, and cash flow. You do not need active credit accounts to generate this information. If your lender works with a company like Inscribe or fiserv that provides alternative credit data analysis, you must provide the correct documents and account details to the lender. They do the rest.

3. Dispute errors on your credit report

If it appears on your credit report, it must be correct. Right?

Bad. Credit reports consistently show incorrect information. Sometimes it is due to a simple computer error. In other cases, the cause is more sinister. No matter who is to blame, a credit report error can hurt your credit and make financial stability even more out of reach.

You can avoid this by checking your credit report often. It’s easy to check your credit report and until December 2023 you can do it for free up to once a week. Normally, you only receive three free credit reports per year, one from each major credit reporting agency.

If you see something that doesn’t look right, dispute it with the credit reporting agency. By law, they must investigate and respond. If it’s a legitimate error, they’ll remove it.

4. Get a co-signer for loans and lines of credit

A co-signer is putting their own reputation (and credit) on the line to help you get a loan, credit card, or other credit product.

Because it’s important to co-sign a loan for someone, it’s best to only ask close relatives, such as parents or siblings, to do it for you. If you stop making payments, the co-signer must step in or their credit score will also drop. But if you can find someone willing to do it for you, it can open up a lot of financial opportunities.

5. Find a stable W-2 job (that you love)

A wise person once said that when you love your job, you never have to work a day in your life. Maybe, maybe not. What’s definitely true is that when you love what you’re doing, you’re less likely to quit. You are more likely to hold a stable job.

This is important not only for your financial stability, but also for your credit. Lenders clearly prefer lending to people with full-time jobs over the self-employed and business owners. They consider income from a traditional job to be more predictable than income from self-employment or business ownership.

For good reason. Business owners and people who work for themselves tend to have good years and bad years. Sometimes so bad that they find it difficult to pay their debts.

So if financial stability and credit opportunities are important to you, find a job you love, negotiate a competitive salary, and start making it your own. Once all this is done, you can look for other sources of income.

More than a number

Unfortunately, your credit score is more than a number. Your credit report is more than a list. Fair or not, your creditworthiness affects almost every aspect of your life.

However, you have some control over your credit fate. There are many creative ways to build your credit or bypass your credit score entirely, while striving for financial stability. Here are some shocking facts about credit cards that most people don’t know that you need to know when trying to improve your score.

You can make sure your utility and rent payments are reflected in your credit score, get a co-signer for new loans and lines of credit, use alternative credit data to improve your creditworthiness, and more.