BUILDING CREDIT

5 Simple Ways to Build Credit

Whether you are new to credit or are trying to “clean up” past mistakes to reestablish a favorable record, you may encounter a frustrating paradox: you must have and use credit to create a credit history. And many financial institutions are reluctant to extend credit to someone without an established record.

But don’t despair, there are ways to establish credit.  Here are 5.

1. A secured card

An excellent start is a secured credit card. You are granted a credit line based on a percentage of a cash deposit you make to your financial institution. Because deposits are usually low, so too will be your credit limit.

Application and annual fees for secured cards are often higher then those associated with unsecured credit cards.

2. The retailer’s card

Consider a local retailer’s credit card. Their criteria is often less rigorous than larger credit issuers. Be sure they subscribe to the major credit reporting agencies though. If not, you won’t be establishing a credit history.

3. A co-signer

Another option is having someone with a positive credit record co-sign an account for you. This requires a great deal of trust on the part of the co-signer because if you fail to pay, he or she is responsible. You could end up jeopardizing a relationship as well as a credit record.

4. Review your credit report

If you have damaged credit, you might need to rectify the past as you’re building your future. Paying old debts and correcting errors on your credit report as soon as possible might be the way to go.

SF Fire Credit Union members can check their FICO® Scores for free in Online & Mobile Banking.

5. Pay off your debts

Once you have a credit line, establish a good history by using it responsibly. Keep balances low, always pay on time, don’t pursue unnecessary credit, and stick with a few good credit instruments of various types.

Building your credit takes time, but it's very important to take positive steps. Your credit score can affect your ability to get a loan with a great rate, buy a car, or even rent an apartment. 

If you get a credit card or a loan, don't charge or borrow more than you can repay, and make sure you'll be able to make the payments on time. 

To learn more about building credit, check out this article from CardRates.com.