How to Build Credit
Having a good credit score can improve your financial wellness. Building or improving your credit takes time and effort. Establishing a positive credit history that shows repayment responsibility is one of the first steps in building good credit. The best things to do to build your credit are: make your monthly payments on-time, keep your credit utilization low, and pay more than the minimum payment.
Ideas to Help Build Your Credit
- Sign up for a secured credit card. These types of credit cards allow you to pay a deposit upfront to secure the card.
- Become an authorized user on another credit card.
- Get a credit builder loan. You borrow money from a lender and once all payments are completed the money is released to you. All payments are reported to the credit bureaus.
It is always recommended to live within your means, make 100% of your payments on time, and only use 30% of your credit card limit.
Ideas to Help Build Your Credit
- Sign up for a secured credit card. These types of credit cards allow you to pay a deposit upfront to secure the card.
- Become an authorized user on another credit card.
- Get a credit builder loan. You borrow money from a lender and once all payments are completed the money is released to you. All payments are reported to the credit bureaus.
It is always recommended to live within your means, make 100% of your payments on time, and only use 30% of your credit card limit.
Credit Report
Your credit report provides lenders a full overview on how you make payments and your entire credit history. The information on a credit report helps lenders decide what terms to offer you. Creditors will generally update the accounts on a monthly basis to report to the credit bureaus. Under federal law, you are entitled to a free copy of your credit report from all three agencies.
Credit Score
Your credit score is a three digit number that tells banks and lenders how likely you are to repay your debt. There are three main credit bureaus: Experian, Transunion, and Equifax. Your score typically ranges from 300-850. There are two systems on how to calculate your score, vantage score and FICO score. With the FICO score model: Exceptional: 800 + , Very Good: 740-799, Good: 670-739, and Poor: 579 and below.
Using the FICO scoring model, here is how your credit score is broken down. There are 5 categories that go into calculating your score:
-Payment History (35%)
-Amounts Owed (30%)
-Length of Credit History (15%)
Learn more about your credit score
Using the FICO scoring model, here is how your credit score is broken down. There are 5 categories that go into calculating your score:
-Payment History (35%)
-Amounts Owed (30%)
-Length of Credit History (15%)
Learn more about your credit score
Credit Monitoring
When there is a change made to your credit report, you will generally be notified within 24 hours either by phone, email or text message. Credit monitoring services are usually done through a third-party company.
If you find anything inaccurate on your credit report, credit monitoring services give you the opportunity to act quickly to dispute it.
There are a few activities that will be reported to you when a change occurs:
-Hard Inquiries
-New Accounts
-Existing Account Changes
-Address Changes
-Identity Protection Services
If you find anything inaccurate on your credit report, credit monitoring services give you the opportunity to act quickly to dispute it.
There are a few activities that will be reported to you when a change occurs:
-Hard Inquiries
-New Accounts
-Existing Account Changes
-Address Changes
-Identity Protection Services
Credit Repair
Repairing your credit score will save you money on loans, credit cards, and insurance. Once you have started the process to repair your credit score, it is important to keep a few things in mind.
Always pay your bills on time. Make sure to set reminders on your calendar or whatever you need to do to remind yourself month after month to pay off your debt
Consider opening a secured account. This will allow you to put a deposit down up front and this becomes your credit limit.
Think about seeking debt counseling. A certified debt counselor can help create a plan to effectively manage your debt.
Always pay your bills on time. Make sure to set reminders on your calendar or whatever you need to do to remind yourself month after month to pay off your debt
Consider opening a secured account. This will allow you to put a deposit down up front and this becomes your credit limit.
Think about seeking debt counseling. A certified debt counselor can help create a plan to effectively manage your debt.