Building Your Credit

1. Building Your Credit

2. Building Credit • Apply for a secured credit card • A secured credit card requires a refundable security deposit which becomes your credit limit • The security deposit prevents you from spending more than you can afford to repay • Secured cards offer a nearly guaranteed approval • They report information to the credit bureaus every month

3. Building Credit • Apply for a credit builder loan • Credit builder loans act like a reverse loan • Banks hold the money in the loan and you make payments every month • At the end of the loan term, you receive the money that the bank has been holding plus a little bit of interest • Credit builder loans are easy to be approved for • Your payment history is reported to credit bureaus and all on-time payments will increase your credit score

4. Building Credit • Get a co-signer • A co-signer is someone who shares equal responsibility on a credit account • A co-signer with a good credit score will increase your ability to be approved for a loan or a credit card • When you have a loan or a credit card, your payment history will positively impact your credit score • Your co-signer is taking a financial risk, so make sure that all payments are on time

5. Building Credit • Become an authorized user on someone else’s credit card • When you are the authorized user on someone else’s account, you will be included on reports to credit bureaus • All on-time payments for the account will positively affect your credit • Be careful, because all negative reports to credit bureaus for the account will also affect your credit

6. Building Credit • Get credit for the rent you pay • Some apartments and landlords report your monthly payments to credit bureaus • You can talk with management and see if this is the case where you plan on renting • It is always worth it to rent at a place that reports your monthly payments • Many student focused apartments do this, as well as apartments that are run by national corporations

7. Building Credit • Avoid opening too many new accounts at once • New accounts lower your average account age • A lot of people change credit cards often to get the best rewards programs, this kills your average account age and damages your credit score • It is much better to identify the type of accounts that you want and stick with them

8. Building Credit • Keep accounts for as long as possible • Unless one of your unused cards has an annual fee, you should keep them all open and active for the sake of the length of payment history and credit utilization • Cards with annual fees should be avoided unless you plan to use them often to take advantage of the rewards

9. Building Credit • Check your credit reports ANNUALLY • Errors can occur with credit reporting • You need to make sure that all information reported is accurate • If there are discrepancies, you can work with the credit bureaus to correct any mistakes • All three major bureaus should be checked (Experian, TransUnion, and Equifax)

10. Building Credit • Make 100% of your payments on time • All payments need to be paid on time, not only with credit accounts • Utility bills and rent are often reported to credit bureaus • Any past-due bills that go unpaid may be sold to a collection agency, which will seriously hurt your credit

11. Building Credit • Keep your credit utilization low • Utilization is your balance when compared to your limit • It is best to pay off your balance in full each month • If you do carry a balance, don’t let it exceed 30% of your credit limit, any more and it can negatively impact your credit score

12. Financial Health • Create a Budget • Pay on time • Late payments and collections can lower your FICO score • Manage your accounts • Keep your balances low • High balances on revolving credit lower your score • Monitor your score • Check your FICO Score every year • Correct Mistakes