Articles - Archived Expert Advice
(Copy and paste the text into your document)Building Your Credit
I've been told that having no credit is considered bad. Is this true? If so, I'd like to start building my credit, but I am not sure where to begin.
Having no credit is often viewed as negative because there is no official record of whether or not you are a good or bad loan risk. But don't fret! There are plenty of ways to begin building good credit. Just understand that in order to do so, you are going to have to prove a track record of financial responsibility, which will take time.
Let's begin by understanding the five factors that affect your credit score:
- Payment history–35 percent
- Amount owed–30 percent
- Length of credit history–15 percent
- New credit and recently opened accounts–10 percent
- Types of credit in use–10 percent
Consider the following steps in order to build and maintain a good credit history:
Apply for a credit card.
Credit cards are considered revolving debt, and are quick and effective ways to build credit. However, if used irresponsibly, a credit card can damage your score. Be sure you never miss a payment, and when possible, pay the balance in full every month.
Apply for another form of credit.
Different types of debt also help increase your score. Consider applying for an installment loan, such as an auto or personal loan.
Pay bills on time.
Paying bills will not necessarily build your credit score, but paying late could damage it.
Don't close an unused card account.
Length of credit history helps your credit score, so keep older accounts open if they are in good standing.If you'd like to talk with a certified credit report reviewer who can look more specifically at your situation, just call at LGFCU financial planner 877.367.5428 or send an email to financialplanner@lgfcu.org.
