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February 22, 2023

How to Build Credit For Beginners

Four steps to establish your credit history.

Credit is an important factor to consider when buying a car, renting an apartment, getting the best insurance rates, and more. But building a solid credit history takes time. Establishing good habits early on is key to helping you reach your personal and financial goals later in life.

Pay your bills on time and in full.

It’s important to know how your credit score is calculated. More than one-third of your score is based on your payment history. It is recommended that you always pay your bills on time to avoid late fees and negative marks on your credit report. While credit cards and loans almost certainly appear on your credit report, other billers, such as utilities and cell phones, sometimes report payment histories too (especially if you’re late paying). If you pay off your balance each month you will avoid paying interest charges. If this isn’t possible, be sure to pay at least the minimum amount required every month. 

Use tools to help establish credit.

If you have difficulty getting a credit card—and that may be the case if you haven’t had access to credit—there are a few options that could help get you started. Some banks offer credit cards designed to help first-time users establish credit, so look around for cards that are secured or made for student use. Having a consistent checking or savings account can also help you in the long run. This won’t necessarily help you build credit, but having a good relationship with a financial institution could help you get a loan down the line or even your first credit card.

Don’t use all your credit.

Lenders don’t like to see you using all your available credit, even if you pay it off every month. Try to keep your borrowing below 30 percent of your total available credit. This is called your credit utilization rate.

Check your credit once a year.

By law, consumers are allowed to check their credit reports once a year for free from each of the three credit bureaus. Some credit card issuers also give you a copy of your credit score for free. This is a good opportunity to make sure your issuers correctly report to the credit bureaus and to check for any fraudulent activity.

Developing your credit score early on can help open doors for you financially and professionally in the future! Stop in, give us a call or visit our website to see how we can help you improve your credit score.