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Give me some credit.

Mel Barnes, SVP – Executive Vice President

Credit is a powerful tool you can use to achieve your financial goals and make important purchases like a car or house. Without good credit, life can get challenging. For example, if you have bad or zero credit and try to buy a car, you’ll either be turned away or be required to pay an exorbitant interest rate.

Having good credit means banks consider you a good credit risk, which comes with financial privileges—as long as you maintain a good credit history.

Building credit with a credit card.

Using a credit card responsibly—faithfully making at least the minimum payment on time—will help you build a solid credit history and improve your credit scores.

When you open your first credit card account, look for a card with a low spending limit, which may be easier to qualify for if your credit history is limited. To build a positive profile on your credit report, make small charges that you can easily pay off, and pay the balance in full every month.

If you have a negative credit history, try applying for a secured credit card, which is usually connected to a savings account. The limit of a secured credit card is typically the amount in the account, or a percentage of it. Make responsible charges, keep your balance low or at zero, and pay on time every month, and you should be able to convert to a traditional credit card. (Before applying for a secured credit card, ask the lender for details about upgrading to a traditional card.)

Another way to establish and build credit is to open a joint credit card account—with a parent, for example—or become an authorized user. With joint accounts, each person is responsible for repaying charges on the card. Late or missed payments by either account holder will affect the credit history of both, so choose your joint account holder wisely.

Building credit without a credit card.

Your credit report is a snapshot of how well you manage what you owe. Whenever you use credit wisely, this information is included in your credit report.

Other ways to build credit include:

  • Paying student loans on time, every month.
  • Getting an auto, home, or personal loan and making payments diligently.
  • Getting a secured loan, which is similar to a secured credit card that is connected to a savings account.
  • Staying current with all your bills, including utilities, phone, etc.

Building credit is a long-term process. The best way to build and improve credit is to make sure you don’t bite off more than you can chew, financially speaking, and to pay all your bills on time every month.

Want to start building credit? Schedule a sit-down with one of our financial advisors. Contact us!

Source: Experian.com (https://www.experian.com/blogs/ask-experian/credit-education/improving-credit/building-credit/)

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