Plan For Better Credit to Meet Bigger Financial Goals

If you’ve laid out some financial goals for the year, having a plan to build better credit is a good first step to take. Good credit means you can borrow money at a lower interest rate, qualify for lower interest rate credit cards, and also save money on utilities, mobile phone service, and insurance. Below are some steps to take to start building better credit today.

1. Establish credit history
   Getting a credit card is the best way to start building your credit history. If you’re not ready or can’t get approved for one, a few lower-risk options include:
   • Apply for a card from a credit union — these are usually lower interest-rate cards with lower credit limits and can be easier to obtain.
   • Get a credit builder loan — this is essentially a loan you pay back in advance. Typically available from credit unions or community banks, you take out a loan and the money is held in an account and released to you once the loan is repaid.
   • Apply for a gas or department store card — these can be easier than a regular credit card to obtain, but be careful as these cards typically have high-interest rates. Only use them to purchase what you can afford and pay off every month.
2. Be responsible with credit
   Using a credit card to pay for monthly subscriptions, groceries, and other necessities is a good way to build a credit history. But misuse them and they’ll hurt you in the long run. Follow a few steps to show that you’re responsible with credit:
   • Don’t apply for too many credit cards — you really only need one or two to demonstrate good behavior.
   • Don’t exceed — or even max out — your credit limit — having too much debt is hard to pay off, and reaching your credit limit raises your debt to income ratio (which hurts you).
   • Stay current — make sure you at least pay the minimum amount due every month, but better if you can pay off the full amount.
   • Don’t close cards you no longer use — closing cards can actually hurt your credit history, so it’s best to keep accounts open that you no longer use.
3. Report your rent
   The credit bureaus accept rental payment history to build or improve your credit. If you pay your rent on time every month, use a service like RentReporters to have your rental payments count towards building your credit. And don’t forget, you can earn credits to pay for RentReporters simply by referring friends and family who sign up!
4. Check your credit report — we wrote a blog post not long ago about the importance of checking your report regularly, and how to do so. Read it here.

In our next post, we’ll look at how to build credit using a secured credit card. Stay tuned!