5 Ways to Build Your Credit
Note: Building credit takes time.
People often search for quick and easy ways to boost their credit, especially when faced with loan applications or opportunities to open new lines of credit. Both require strong credit scores, and the best way to increase your three-digit score is strategically and over time.
Building credit looks different for everyone, too. Some people may be looking to establish credit for the first time while others are seeking tips on repairing damaged credit. Below are five tried-and-true tips for every credit builder:
Us a Credit Card
Utilizing a credit card is one of the easiest ways to boost credit, but it must be done tactfully. Mismanaging credit can land you in major debt and can result in an extremely low credit score.
For those with little to no credit history, we encourage applying for just one credit card, likely a secured one designed to protect the lender from mistakes of novice card users. Use your card for any number of purchases, but be sure to pay your monthly statement on time, if not before, and never max out your credit limit. Using only a small percentage of your credit limit is likely to build your score as it proves responsible spending habits.
For users looking to improve a damaged credit history, we suggest limiting the number of credit cards you use. Transferring debts from one credit card to another is a surefire way to decrease your credit score. Also, only borrow what you can afford. Avoid making large purchases on credit cards if you have insufficient funds to pay the debt.
Look out for scammers too. Check your credit postings weekly to monitor and avoid theft.
Student loans, auto loans, home loans, business loans, and personal loans – all monies borrowed have the ability to make or break your credit score. Loan management is your key to success. Similar to credit card usage, only borrow what you can afford and make payments on time according to your fee schedule.
Adding a co-signer not only increases the likelihood of qualifying for a loan, especially for those with little to no credit history, but helps first-time borrowers establish smart money habits by being held accountable by the co-signer.
Adopt Good Spending Habits
This tip is pretty cut and dry. Buy what you want, when you want, so long as you have the funds to do so. Avoid making several large purchases at once, but if you do, pay them off as soon as possible. A large portion of your credit score is dependent on the frequency of your payments, as well as payment amounts. Paying in full is always better than paying the minimum on credit card balances.
Have a second credit card you rarely use? Keep it that way. Having an open line of credit with a minimal balance is an easy way to build your credit score.
Save Mature Accounts
You may have a credit card you used in college or a checking account open from high school; these seemingly useless accounts can actually help boost your credit as they age. The older your credit age, the higher your credit score is likely to be (so long as you practice smart credit usage).
Set a Goal
Working towards an end goal makes any process easier. Set a realistic goal for your credit score and adopt the above habits to help you achieve it. Bear in mind that score increases takes time, a year in most cases, and have marginal room for growth during each period. Aim for gaining 100 points in your first year of credit building.