How to Build Credit

Building credit can seem stressful, especially when starting from scratch. When you are trying to establish credit, it can seem a bit complicated and even backward. We're going to help you understand the basics of building credit and responsibly using credit. 

Key Takeaways

• To get started building credit, a credit card or loan is good place to get started.
• If you do not qualify for a credit card yet, consider becoming an authorized user.
• Good financial habits are the key to good credit, as credit scores are based on how you have managed debt.
• Building credit takes some patience, as it takes continuous effort and time. 

How to Start Building Credit

Since credit is based on how you manage debt, a great way to get started building credit is to apply for a credit card and use it responsibly. 

Tips for Finding a Credit Card

• Look for a card with a low interest rate. You will want to pay off your balance each month, but it's good to have a low rate as a safety not in case you would need it. 
• Try to find a card that will not charge you any fees, or have beneficial rewards. 
• Find a card with fraud notifications and $0 fraud liability, the last thing you want when building credit is to go into debt due to fraud. 
• Make sure your can easily check your account balances, we recommend getting a card that has a digital banking app so you can access your balance anytime.

Once You Have Found a Card

• It's important to pay off your monthly balance and not just make the minimum payment when building credit.
• Make your credit card payment on time each month. 
• Keep your credit utilization in mind when increasing your balance. Learn more about credit utilization here.
• Consistently check your credit score to track your progress.
• Do not close your account. If you decide to stop using your card, simply keep the balance at $0. Closing an account will ding your credit score. 

Additional Ways to Build Credit

If you are unable to apply for a credit card, there are some additional resources you can use to help slowly build credit enough to qualify.

Become an Authorized User

If you are unable to qualify for a credit card on your own, you may have the option of becoming an authorized user on someone else's exisiting account. As an authorized user, you would have your own card, but are not responsible for the payments as that is the original card owner's responsibility. There must be trust established between you and the card owner because any missed payments or other negative actions would poorly affect both of your credit scores. Another option for some is to have a co-signer when applying for their first credit card. 

Loans

Student loans, auto loans, and mortgages are all examples of loans that will raise your credit score overtime as long as you are making on time payments and managing your loans responsibly. 

Rent Reporting Services

Sometimes landlords can join a service that will report all of their tenants rent payments to credit bureaus. If your landlord doesn't have onbe of these services, you can pay for a service to do this or use a free option. You can learn more about rent reporting services here.

You aren't alone when wondering how to build credit. If you need support in learning your options, a relationship banker can discuss your options with you and help set you on a path for success. Contact us today or stop in a branch to get started.