3 Easy Steps to Build Your Credit

Here are some quick ways to build your credit!

If you have bad credit or no credit, there are some techniques you can use to build your credit. 

Build Your Credit with a Secured Credit Card

First, request a secured credit card.    We recommend good secured credit cards to build your credit.   A secured credit card works a lot like a “normal” credit card, except you are required to put down a security deposit.  Basically, they are holding a security deposit as assurance that you will repay them.   Depending on your situation, your credit limit will either be the full amount of the security deposit, or some percentage.

Having a secured credit card is an important tool in building your credit, because even though your full credit line may be backed by your security deposit, it is still an extension of credit!   You are still considered to have an open credit line, and your creditor will report your history to the credit bureaus.   A secured credit card is great for establishing length of credit history and payment timeliness.  Be sure to ALWAYS pay your bill on time.  You want to build your credit, not make it worse!

Pay Off Your Debt Every Month

Second, a lot of people open a credit line to help their credit, but then rack up a lot of debt!  Acquiring debt won’t help you build your credit!

Make sure you pay off whatever you charge every month.  Your objective is to show you can manage debt, not show that you accumulate it!   And yes, you do need to use your secured credit card, not just open one and put it in a desk drawer.  You are trying to achieve payment history.   If it helps you, use it just for gasoline every month, and then pay if off.

Be sure to pay your creditors on time every month!  Late payments will quickly undo all your good efforts.  If you have a hard time keeping track of your payment due date, set up automatic payments through your checking account.   Late payments won’t help you build your credit.

Don’t apply for a bunch of credit cards all at once.    Every time you apply for credit, the creditor makes an inquiry to the credit bureau.   Your credit score is decreased every time there is an inquiry.  Plus, opening a bunch of accounts at once makes you look risky to creditors.   You want to build your credit over time, not all at once.

Pull Your 3 Credit Reports

After a few months, it’s a good idea to pull your credit again.   You want to make sure your history is reported correctly for your secured credit card, and you also want to make sure there are no other errors on your report.   It’s also a good idea to protect your credit with a good credit monitoring service.

At this point, it makes sense to add another secured credit card.   Follow the same advice – pay your balance in full each month, and always pay on time.   Follow this advice, and you will build your credit in no time!