How To Build Your Credit

In order to establish good credit, you must to start buying on credit. Building a good credit history will prove to lenders your ability to pay for things that you purchase. Read through these easy steps and tips to quickly bring your credit score up, and don't hesitate to call your loan officer with any questions you might have.

Steps

1. Apply for a credit card. Choose one that offers the lowest interest rate and if possible one that offers a cash back percentage on purchases you make.
2. Sit down and really examine your budget. Make a list of the things or services you buy each month that you consider necessary purchases. For example: gasoline, rent, utilities, groceries, etc.
3. Use your credit card instead of cash to make these purchases. Make sure that you do not charge more than you can actually afford to pay at the end of the month.
4. Always pay your credit card bill IN FULL as soon as you receive it. Do not just make the minimum payment or your debt will overwhelm you in a few short months.
5. Open checking and savings accounts. Lenders see bank accounts and consistent savings behavior as signs of financial stability. Evidence of continuous use of checking and savings accounts increases your chances that a bank will offer you a credit card.
6. You may also contact your bank or credit union to open a pre-paid charge account with them. You will deposit a specific amount of money into the account.
7. You may charge your necessary purchases to this account, but watch the balance. This method only allows you to charge up to the amount you've deposited, and will count down, each time you make a purchase with it.

Tips

1. When you receive your credit card, ask that your date of payment coincide with a date when you know you will have the money to pay. The credit card company will gladly work with you on this.
2. Having your credit card payment that has the same due date as your utilities, rent or mortgage will make it difficult for you to have the funds on hand to pay off your credit card.
3. Check your statement for the date that the payment is due. If you want to buy something close to that date, wait until after you have made your paid off the previous month's bill. This way you will avoid an extra charge within the same billing period.
4. Once you have begun establishing a credit history, apply for a small amount of installment credit. The best credit scores are obtained through the use of installment credit (auto loans, personal loans and mortgages) in addition to revolving credit (credit cards and lines of credit).

Warning

This cannot be stressed enough: ONLY use your credit card to charge an amount that you know you can pay in full at the end of the month. Putting frivolous purchases (like that new big-screen TV) on your credit card will only damage your credit, increase your debt, and harm your chances of getting a home loan.

Need to Repair Your Credit?

Credit counseling can improve your score tremendously. A credit counselor specializes in credit repair and can help drive down your debt and put you in control of your finances. They can also negotiate with credit card companies to lower your rate and lower your payments.

jessica@amstn.com