Credit 101: Establishing (Good) Credit

What exactly is credit? 

Credit is your reputation as a borrower, and it tells others how likely you are to repay your loans. Good credit is usually needed for buying or renting a home, getting a new job, and even for getting cell phone or other utility services.

And for most of us, thinking about credit is waaaaaay down the list of things we want to do. But your credit is so important that when you do need it, you’ll really wish that you had given it some thought.  Here are five tips to get you started.  

1. Consider a credit card. 
   Opening and using a credit card is one of the easiest ways for a beginner to build credit. Other options for building credit include student loans, personal loans, auto loans and mortgages. To avoid any spending temptation, apply for a credit card with a low limit and start using it and paying it off each and every month.
    
2. Pay off your balance in full each month. 
   It's important to set a spending limit that you can actually afford to pay off in full every month. This will keep your credit in good standing and help you avoid late fees and pesky interest charges. Plus, it shows lenders that you’re a responsible borrower.
    
3. Use it, but don’t abuse it.  
   We’re not saying you should get swipe-happy and max out your card every month—seriously, don’t do that—but getting into the habit of using it and paying it off every month is a key part of building credit.
    
4. Pay off your balance on time, every time. 
   Late payments are a big negative mark on your credit, so do whatever it takes to remind yourself of your card’s payment due date. This goes for your other bills, too. Even a late payment on your electricity bill can have a negative impact on your credit score. 
    
5. Talk to your financial institution. 
   Building a relationship with your financial institution can make it easier to qualify for a low-limit or secured credit card. Credit unions are a good option for building credit for the first time or trying to rebuild credit, as they’re typically smaller organizations which offer personalized services that can help new borrowers establish credit history. 
    

Have questions?
iQcu is here to help. Give us a call at 360.695.3441.