METRO REALTY
HOW TO BUILD GOOD CREDIT
Building a high credit score is essential for financial stability and long-term success. Whether it's renting an apartment, leasing a car, receiving credit card offers, or buying a house, a high credit score opens doors. Below are tools and strategies to effectively build and improve your credit.
Credit Cards
Secured Credit Cards: A secured card requires a deposit of a certain amount (Pre-Paid), serving as the credit limit, making it ideal for beginners or those rebuilding credit.
Student Credit Cards: Specifically designed for students with little to no credit history.
Low Limit Credit Cards: Some companies offer starter cards with low credit limits.
Tips:
- Use the card for small, manageable purchases. Applying for a Macy’s credit card can be a good first step.
- Pay the balance regularly but not in full each month to establish a payment history.
- Set up an online account with automatic payments to avoid late payments.
Authorized User Status
Ask family or friends with high credit scores to add you as an authorized user on their credit card account. Their good usage habits will positively reflect on your credit report—even if you don’t use the card.
Credit Builder Loans
Offered by credit unions or small banks, these loans work by keeping your payments in a savings account. Once repaid, the funds are released to you, and the payment history is reported to credit bureaus.
Rent Payment Reporting Services
Some credit services report on-time rent payments to the credit report, helping to build credit. For instance, paying rent via a credit card can earn points.
Utility and Mobile Phone Bills
Use services like Experian Boost, which add to your credit history when bills like utilities are paid on time.
Financial Apps and Tools
Credit Monitoring Apps: These apps help you track your credit score and offer ways to improve it.
Diversity in Credit
Over time, incorporate different types of credit (e.g., credit cards, car loans, mortgages) to show lenders you can responsibly manage various forms of credit. Keep your debt balance at 10-20% of your credit limit. Avoid closing credit accounts.
Responsible Borrowing Habits
- Always pay bills on time. Payment history makes up 35% of your credit score.
- Maintain a low credit utilization rate (less than 30% of your total credit limit).
What to Avoid When Building Credit
- Opening too many accounts simultaneously: Each application can result in a credit score check.
- Keeping high balances: This increases your credit utilization rate.
- Ignoring errors: Regularly check your credit report for inaccuracies and dispute them if necessary.
