We know you’re a trustworthy, reliable person. Anyone who has ever met you can tell right away that you fulfill obligations and that your word is as “good as gold.” I have bad news and more bad news. First, the price of gold is dropping and second, your reliability and trustworthiness, at least to people who might lend you large sums of money to buy a car or a home, relies on three little numbers – your credit score.
So, what are 4 things you need to do to build your credit?
- Get a credit card. First check out RMLEFCU’s visa cards. We have a couple options available depending on whether you want better rewards or a lower interest rate. If you’re unable to get an unsecured credit card, look into a gas card or store card. We would suggest if it’s a store card, to get one at a place where you normally do your shopping. For example, check out Target or Wal-Mart store credit cards. With Target you’ll get 5% off with every purchase, no shipping if you shop online and you’ll have 30 extra days to return items. With Wal-Mart, when you first open your account and spend $75 at Walmart.com, you’ll save $25. You’ll also receive 5 cents off per gallon at participating Wal-Mart gas stations. Bonus: Neither card has an annual fee.
- Pay your card IN FULL and ON TIME each month. We know what you’re thinking, isn’t this two things in one? “Paying in full” is like the peanut butter to the jelly that is “on time.” They are best when they are done together. Contrary to popular belief, you don’t need to carry a balance to build an awesome score. If you absolutely cannot pay it in full, always pay the minimum balance.
To make sure you are never late, set up an automatic payment. If for some reason that option is not available, ensure you have some kind of reminder, handwritten or electronic, to pay the bill each month. Thirty-five percent of your credit score is determined by your track record with making on-time payments on your bills.
There are a couple of myths out there about building credit that, like cockroaches, are hard to kill. Carrying a large balance will help boost your score and so will closing old accounts you don’t use. Doing either of these can really HURT your credit, so avoid them at all costs. Little known fact: Fifteen percent of your credit score is based on the length of time you’ve maintained a credit account.
- Use the right amount of credit. What is especially important is how much of your available credit you are using across all of your credit cards and on each individual card. This is known as “credit utilization.” Using 30 percent of your available credit or less is good but using 10 percent or less is ideal. This goes for people who pay their balances in full each month, not just those who carry a balance.
- If you cannot get a credit card of any type, consider a credit builder loan. It is a risk free way to show you are worthy. RMLEFCU offers a credit builder loan to any members who are at least 18 and have the means to pay it back. The amount borrowed is placed in a RMLEFCU share account where it will earn interest at the current APY (Annual Percentage Yield) of our savings account. The loan proceeds are placed on a special hold and once you make the repayments, you can access the money. No upfront payment is required. You can borrow any amount between $500 and $5,000. Learn more about credit builder loans here.
If you follow these steps, you won’t need to worry about gold prices or market volatility, because your rock solid credit will be able to insulate you from tumultuous times. Beware of “fools gold” and anyone who tells you there are super easy and quick ways to build your credit.
Final takeaway? There is no substitute for regular, on-time, in full payments carried out over a long period of time.