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How to Build Credit and Improve Credit Score
How to Build Credit One Step at a Time
Simple Ways to Build Credit for Beginners
When you have big dreams of a new car or a house, there may be one thing standing in your way: your credit score. A good credit score has a major impact on your everyday life and finances, so it’s important to make a solid plan for building a strong credit score.
Your credit score can determine the interest rate you’ll pay on a loan or credit card and if you’ll qualify for a mortgage. The higher your credit rating, the easier it will be to secure loans like these with lower interest rates. This means the stronger your credit score, the cheaper it could be to borrow money. Luckily, there’s a lot you can do to build credit and keep your credit score in check to make big purchases easier in the future.
Wondering How to Build Credit Fast?
When you want to build credit quickly, it’s important to remember that a large part of improving your credit score is showing good credit habits over time. So while you can’t build credit overnight, with the right habits and activity on your account, someone with a lower credit score can see bigger improvements faster. Here’s the catch: to build credit, you have to have credit. Here are four key tips for beginners to learn how to build credit fast and responsibly:
Tip 1: Build Credit as an Authorized User
An authorized user is an additional cardholder on an established credit account. This option lets you build your credit history on the back of someone with established credit, usually a trusted family member. Before becoming an authorized user, have the account holder confirm the credit card issuer reports to all three credit bureaus.
Pro Tip: If the cardholder has problems making payments, it will affect your credit score, so choose someone who has a good payment history.
Tip 2: Use a Secured Credit Card
A secured credit card works just like a regular card, with one major exception: You secure the line of credit with a cash deposit paid to the card issuer. The deposit lowers their risk, making it more likely for you to get approved for credit, and the deposit acts as your credit limit. You can use a secured credit card like any other credit card up to that limit, which extends again when it’s repaid. Secured credit cards are good credit-builder cards because they are low risk and help you establish a strong repayment record.
Pro Tip: You don’t have to start with a large credit limit. Even $200 can help you build your credit as you get started.
Tip 3: Get a Credit Card in Your Name
If you have a bank account, ask your financial institution if they offer credit cards. Because you have a relationship established, you may have a higher chance of credit card approval. Make sure you do your research into how your card options work because terms and rates can get complicated. Fees, offers and penalties also vary by company. The biggest differences among credit cards (aside from rewards) are often credit limits, interest rates and fees. A high credit limit can be tempting, but even if you qualify for one, it’s crucial to spend only within your means and repay it each month. Otherwise, you could end up paying high interest on the balance.
Tip 4: Pay Your Bills on Time and in Full
Paying your bills on time is one of the best ways to build credit. If you miss a payment, do your best to get it paid before it becomes 30 days late. That’s when the lender can report your account to the credit bureaus, negatively affecting your credit history and score. Missed payments can also trigger interest on certain accounts, making it harder to pay back over time.
How to Improve Your Credit Score and Give It the Boost It Needs
As you start to build credit, you will be building a credit score, or FICO score. Your credit score is an indicator to lenders, employers and landlords of your creditworthiness. There are several factors that go into calculating your credit score, including payment history, credit utilization, credit mix and more. Although ranges vary depending on the credit score model, the following can be used as a benchmark:
- FAIR: scores from 580 to 669
- GOOD: scores from 670 to 739
- VERY GOOD: 740 to 799
- EXCELLENT: 800 and up
Understanding and learning how to improve your credit score will help you gain confidence to start building good credit fast. Start with these tips to improve your credit score:
- Be mindful of your credit use: When you pay your credit card each month, you affect your credit utilization rate, a measure of how much of your credit you are using. Low credit utilization is often a good thing because you are using less of your available credit.
- Don’t open too many new credit card accounts at the same time: Credit card applications can result in a hard inquiry on your credit report, which can lower your score. You don’t want to have too many inquiries close together. Explore your options before applying for a new credit card, choose one or two with the best terms for your spending habits, then avoid applying for new credit cards for a while.
- Shop for one loan at a time: If you apply for a personal loan, car loan and mortgage at the same time, all those applications will appear on your credit report simultaneously. Each will result in a temporary drop in your credit score that could last a year.
- Check your credit reports: The three credit bureaus must each give you one free credit report per year. Review all three each year by visiting annualcreditreport.com. If you find any inaccuracies, contact the credit bureau to correct them. For WesBanco Mobile app users, checking your credit score gets even easier. Just use the WesBanco Mobile App to check your credit score insights anytime, anywhere. This one, powerful tool allows you to access your credit score and full credit report. You can also monitor your credit and explore our financial tips on improving your score.
- Pro Tip: Checking your credit reports acts as a baseline for monitoring your credit usage and allows you to see how to improve your credit score.
Ready to start building credit? Apply for a credit card today and use it responsibly to build credit fast.
For more ways to build credit, check out the coaching session below.
Content is for informational purposes only and is not intended to provide legal or financial advice. The views and opinions expressed do not necessarily represent the views and opinions of WesBanco.
While we hope you find this content useful, it is only intended to serve as a starting point. Your next step is to speak with a qualified, licensed professional who can provide advice tailored to your individual circumstances. Nothing in this article, nor in any associated resources, should be construed as financial or legal advice. Furthermore, while we have made good faith efforts to ensure that the information presented was correct as of the date the content was prepared, we are unable to guarantee that it remains accurate today.
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