How Do You Build Credit?

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What will you learn

What is credit used for?

Quick ways to improve your credit score.

How to build and re-build credit over time.

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Why Would I Want to Build Credit?

Credit, specifically good or excellent credit, is necessary for anyone interested in purchasing anything that you do not pay in full for at the time of purchase. Whether you acquire credit card debt for a new wardrobe, a personal loan to pay off medical bills, or an auto or home loan that will incur tens of thousands of dollars in interest (or more!), credit becomes a necessary consideration for many.

The best rates and lowest costs are offered to consumers with the least risk of repayment – or the highest credit scores – and with a solid history of responsible credit usage. Building credit early and intentionally is the best preparation for having a strong credit score when it matters most!

How Much Credit Do You Start With?

Credit is earned over time by keeping your credit usage low and consistently paying your bills on time. These healthy habits show lenders you are low risk and increase your creditworthiness.

Students and many young adults who do not have any sufficient credit history may find it difficult to build credit. How can you get approved for credit cards or other credit-building products without having any credit to back it up? It can feel frustrating to need credit in order to get credit!

How Do You Build Credit?

There are different strategies for building credit, depending on your long- and short-term goals. One of the fastest ways to increase your credit is to lower your credit utilization score – or the percentage of available credit compared to your total credit limits across all accounts. For example, if you have a credit card with a credit limit of $1,000 and a balance on that card of 800, then you have an 80% credit utilization.

This means that if you have outstanding debts, paying them down as quickly as possible will decrease your credit utilization, while decreasing what you owe to lenders. Alternatively, if you cannot pay the balances in full, you can try to increase your total credit limit. You can do this by either contacting your current lender(s) and requesting a credit line increase or opening a new line of credit and keeping its usage as low as possible (zero is best!).

For those with no credit history, also known as a thin credit profile, you may need the help of a trusted family member or friend who can add you as an authorized user on one of their credit accounts. Keep in mind – this will affect both of your credit, so make sure you are both aware of the potential ramifications of each other’s purchases and payments.

There are also a number of “credit-building” loans and credit card opportunities available for those with a limited or delinquent credit history. Be wary of predatory companies and outrageous penalties or fees when looking into these products.

What Else Can I Do to Build Credit?

Building credit takes time and more importantly, patience. Whether you are increasing your credit score because you have a thin credit profile or trying to rebuild your score after some credit damage, patience is key!

For those with very low scores, keep in mind you did not lower your credit score overnight, so in turn, you will not be able to raise it overnight either. However, you can start making changes and seeing progress right away with the right tools!

There Is Help Available to Those Trying to Build Credit!

Credit Helpers can help you start implementing changes and removing inaccuracies on your credit reports immediately. As seasoned experts, Credit Helpers can review your current credit situation and goals to help you make the right decisions to increase and maintain your credit. We are here to help you secure your future goals and improve your purchasing power.

If you need help navigating your options for to build or rebuild your credit portfolio, contact a Credit Helper today for expert advice and a customized roadmap to credit repair!

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