Guidelines for Building Credit
OneBanc Helpful Tips:
One question that a banker knows he/she will be asked during their banking career is, “How do I build credit?” And, the answer is in knowing as much about what helps build your credit score as it does with what could hurt your credit score.
- Get a secured credit card. You will be asked to put up a deposit to provide assurance to the creditor that you will repay your debt. How responsibly you use a secure credit card will affect your credit score – either positively or negatively.
- Only charge what you can afford to pay off in full on credit cards. Building credit means consistently demonstrating your ability to pay back any money that you borrow. So, your goal is to show your lender that you can responsibly manage debt.
- Get a secured loan. Works similarly to the secured credit card but this is an installment loan versus a revolving line of credit. You will have a fixed term, fixed rate, and a fixed payment during the duration of the term of the loan.
- Pay on time every month. Live by the golden rule of good credit – pay all of your bills and debt obligations on time every month.
- Avoid applying for numerous accounts all at once. Each time you apply for a credit card or a loan, your credit score takes a small hit. And, since the goal is to build your credit, you don’t want to chip away at building a solid credit score.
- Check your progress by checking your credit report and score. It is recommended that after six months of making timely payments on either a credit card or an installment loan, check your status by viewing your credit report and score. If you need help reading the credit report, bring to a banker and let them do a financial check up with you.
- After a year, apply for more credit. Twelve months of timely payments should be enough to show that you can manage debt responsibly. Please understand however, that financial institutions also take into account the most you ever borrowed so going from a $500 credit card limit to a $250,000 home loan request might be a stretch so patience while building your credit will be necessary.