Building Credit, Building Lives
Building your credit seems like a daunting task.
Having credit history can open doors to your financial future. Without it you will find it hard to qualify for a place of residence, credit card or loan. Credit makes the proverbial financial world go around but how can you build credit if you don't have any? There are ways to build your credit that will help you get started on the path to creating a better financial future.
Everyone has financial goals. That's why it's important to understand how credit works and how it benefits you. Showing a history of responsible payments on a credit card or loan is a good first start, but there are practical ways to do that while building a dream for yourself. When you borrow, you begin a credit history which details your payment history and your credit account. This is where your credit journey begins.
Starting the credit journey
Every credit journey begins with developing credit history. For some, good credit takes time to develop and maintain but the rewards will open better financial opportunities. You can get prequalified for bigger purchase items like furniture and appliances, or electronics and TVs.
Credit cards: Credit cards offer an opportunity for those who have no credit, to start a credit line. If you are new to credit, your credit line may be minimal, but this affords you an opportunity to pay off your bills each month. There are several credit cards available but if you are building credit, a small credit line is a great way to go.
Installment loans: With an installment loan the buyer pays a fixed payment every month for the length of the loan. The payment often includes the interest. This option presents no financial surprises each month and you can plan your budget accordingly.
Have a co-signer: For individuals that have no credit, a co-signer is often necessary. This option may qualify you for better terms. You are still responsible for timely payments each month. Keep in mind, a loan or line of credit that has a co-signer will reflect on both you and your co-signer's credit history.
Retailer credit cards: Retailer credit cards can help you get the necessities for your home or apartment. Whether it’s buying a new TV or furniture set to furnish your new residence, retail credit cards help you make it happen. It provides a level of buying power you need and build credit at the same time. It is important to note that retail credit cards act similarly to credit cards. On-time monthly payments are still required.
The above items are only a few of the ways you can start your credit journey. There are several more that can help you take that first step to build or improve your credit. Never take credit for granted - it is important to your financial future.
Why you want good credit
A good credit score is the key to good financial health. That health can open doors now and for the future.
- Better terms on loans and credit cards. This includes better rates on retail and store credit cards to boost your purchasing power.
- Discounts and lower premiums on insurance.
- Approval rates for non-credit applications can dramatically improve.
- Opens options to open several lines of credit and loans.
Building credit takes time. Staying on course and making on-time monthly payments will help you get to a higher credit plateau quickly. The rewards at the end of the tunnel can be both rewarding and exciting.
Good credit habits to maintain
As with many good things in life, the key to keeping it good is maintaining it. Credit is no exception. You can build up your credit, but if you don't maintain good habits, you can quickly decrease your credit score. Here are some ways to maintain good credit habits once you start getting established:
- Pay your bills on time
- Do not max out your credit account
- Do not open multiple credit accounts if you can avoid it
- Monitor your debt-to-income ratio to understand your budget
- Set a budget
Building credit FAQ
How do I build credit if I’m new to the United States?
If you're new to the United States, congratulations! The credit building journey begins in the same way as if you are a U.S. citizen. Retail credit cards, co-signers and installment loans are good areas to start building your credit if you are new to the United States.
Can I build my credit fast?
While fast may be a subjective term, there are ways to build your credit score such as making frequent payments, disputing credit report errors, keep fewer lines of credit open, and not maxing out your credit card.
How can I rebuild my credit?
You can take the same steps as building credit if you are rebuilding it. An important piece of the puzzle is to make your monthly payments and close the gap on your line of credit. Debt consolidation should also be considered to help make your payments manageable.
Can I build credit without a credit card?
You can but it may be easier to qualify for a credit card while building a credit history than with other options like applying for a loan for a car or mortgage.
What if I accidentally miss a payment?
Don’t be late, but if you feel like you are coming close to missing a payment, contact your credit company to work out solutions that will not affect your credit negatively.
If you have good credit or building it, you can get prequalified to purchase aspiring items for your home, no matter the space.