Easy Ways To Build Your Credit

Federation To Protect
4 min readAug 18, 2016

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Do not fear. Building your credit is a lot less complicated than you may think. In fact, it’s mostly about doing taking steps responsible people do anyway. Think of building your credit as like setting your alarm for 6:00 in the morning and then getting up when the alarm goes off. That’s the first time the alarm goes off. No hitting the snooze button five times. No muffling the alarm with your pillow.

Before we get into the meat of this, let’s get the basics out of the way: Your credit, aka your credit rating or FICO score, is what lenders (banks and other institutions) use to determine if they will loan you money, how much they will loan you, and how much they will charge for it.

Establish a solid history
History — your payment history, that is — can be your friend or your nemesis. A lengthy payment history can significantly build your rating, assuming it’s a good one. If you look at one of your utility bills, it will say something like “$150 if paid BEFORE due date, or $160 if paid AFTER due date.” Always pay BEFORE the due date. Paying after the due date more than a few times, even though you pay the higher amount, makes for a bad payment history. Start as soon as you can. If you share an apartment with a roommate, you’re not building a payment history if all the utility bills are in the name of the roommate.

Go easy on the credit cards
Credit cards are an easy way to build credit. They are just another way of taking out small loans. But this comes with a few caveats. First, card interest rates are waaaaaay higher than bank loans. They become very expensive if you don’t pay them off monthly. Second, one or two credit cards should be enough for most people. Having a lot of credit card accounts can hurt your rating. It can also hurt your credit if you frequently jump from one credit card offer to another. Get them and keep them. If you decide to quit using a credit card after awhile in favor of another one, however, don’t assume the issuer of the first one will remove you from their list of customers. Contact them to cancel and make sure you receive confirmation.

Don’t carry large balances
As a general rule, if you don’t have the money, don’t buy that shiny bauble you have your eye on. But using a credit card has its advantages in addition to helping build credit, such as renting a car or earning points for a trip. It is essential, however, to either pay off the full balance before the bill is due, or carry only a small balance forward. If you repeatedly carry over a large balance, it throws up a red flag for credit raters and lenders.

Shop for a credit builder loan
Some credit unions and banks offer small loans specifically for customers trying to bump up their credit profile. Such loans work in various ways, but the financial institution would in most cases put the money in a savings account. When you have paid off the amount off, plus interest — say over the course of a few months — you receive access to the money.

If a credit builder loan does not sound appealing to you, ask a responsible person in your life to co-sign a loan for you. You will have more options among lending institutions, because you will be leveraging the good credit of the co-signer. The loan history will show up on both of your records, however, so you must make your payments on time. Otherwise, the co-signer’s history will be negatively affected, too. This could make for an uncomfortable family Thanksgiving dinner if the co-signer is your parent.

Pay down your student loan
Student loans are a huge problem in the U.S., with the current debt estimated at more than one trillion dollars. If you have a student loan, you may feel like a huge chunk of that debt belongs to you. But it’s not all bad, because it means you already have a credit history, as well as a good start on increasing your score. Make it a top priority to pay down your student loan consistently, because it is one of the fastest ways to boost your rating.

The more types of credit you have, the better your credit rating will be. It is hard to for a person with only one or two types of credit to build a solid rating. If all you have is a gym membership payment plan and no credit cards or a car loan, your rating will remain weak. Even if you don’t think you need credit for anything right now, start building a solid credit history as soon as possible.*

*This article provides broad and general guidelines and does not constitute professional or legal advice. You should not use this article as a substitute for your own judgment, and you should consult professional advisers before making any advertising, tax, legal, financial planning or investment decisions.

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Federation To Protect
Federation To Protect

Written by Federation To Protect

The Federation To Protect is a non-profit organization created with the purpose to provide responsible options to ensure consumers’ trust.

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