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How to Establish Credit or Rebuild Your Credit

Wednesday, August 17, 2016 - 01:00

Why Does Having Good Credit Matter?

What is listed on your credit report has a far reaching impact on one’s lifestyle in many ways. Where you live and even the car you drive often depend on your access to credit.  Applications and financing of mortgage loans, rentals, utility services, credit cards, employment, and insurance rates are generally credit-based decisions. This post offers tips to establish credit whether you are just starting out or are at the rebuilding stage.

How Do I Rebuild or Establish Credit for the First Time?

Step 1:

  • Be savvy and select an issuer that reports the account and payment activity to one or more national credit bureaus.
    • A credit ‘inquiry’ is placed on your credit report when applications are made with an issuer.
    • Having too many inquiries in a short period of time may hinder approval. For instance, opening 3 store cards in the same week can lower your credit score.
  • A common approach to credit building is getting credit cards or loans in your name. Offers vary, so comparing fees and terms before you apply will help ensure the right choice for your finances.

Gas cards and department store cards

These are considered “limited use” cards. These are generally accepted for transactions with the issuing retailer.

Secured credit cards

Secured cards have credit limits based on a deposit you make. Your deposit is the security a card issuer collects funds from if borrowed funds go unpaid.

Visa or MasterCard

These credit cards are accepted by many different types of merchants and are known as “universal” cards. These are often made available by your bank or credit union or marketing solicitations.

A small bank or credit union loan

Generally, collateral or a credit-worthy co-signer is needed to guarantee the loan. On co-signed loans, both parties’ credit files will reflect payment history and both are equally responsible for repayment of the debt.

Step #2:  

  • Be strategic after credit has been approved.
    • Send at least the minimum payments before or by the due dates on all credit obligations. This is the single most important factor for good credit reporting status.
    • Limit the number of cards you own and the loans you take out and keep debt balances under 30% of each credit limit to show responsible use.
  • Know what is on your Equifax, TransUnion, and Experian credit reports by requesting one free per year from each bureau. They are available online at Annual Credit Report.com.
If you make a mistake and miss or make a late payment, don't avoid the situation. Instead be proactive to establish credit. Here are more tips to improve your credit score fast.

If you have a low credit score, there may be several reasons why. If you're not quite sure where to start, LSS offers a free and confidential credit report review. Our financial counselors will help you navigate your report and determine options for improving credit and even paying off debt. Click here to GET STARTED ONLINE or call 888.577.2227 to schedule an appointment over the phone or in person.