

Improving Existing Credit

For anyone looking to improve their credit score, credit utilization is the name of the game. Credit utilization is indicative of the amount of credit you are using compared to the total available amount. Many people suggest keeping your credit utilization below thirty percent, but lower usage is almost always best. While you can lower credit utilization by paying down credit card balances, you can also achieve a similar effect by requesting an increase in your available credit. Be warned, however, that many people are tempted to spend more when they have more credit available. This is a sure-fire way to get into credit card debt, so be sure to keep your balances low if you choose this option.

Building Credit From the Ground Up

Everyone has to start somewhere. There are plenty of useful strategies for building credit as a beginner, and many banks and credit unions have programs specifically designed for new borrowers. Credit-builder loans and secured credit cards are two such programs, and they typically have built-in safeguards to prevent incurring a massive amount of debt right off the bat. Secured credit cards often require a deposit equal to the credit limit upfront, and borrowers make payments monthly as they would with a traditional credit card. Credit-builder loans require borrowers to make payments over a set term rather than borrowing money upfront and paying it back later. Participants in these programs can access the funds at the end of the loan term. Payments for both of these kinds of programs are reported to credit bureaus, adding to your credit history.

Research is Key When Building Credit

With any type of financial program, account, loan, or credit card, extensive research is critical. Hidden terms and fees are pervasive in finance, and moving forward with financial agreements without adequate research can result in massive debt and exorbitant fees and penalties. Make sure to seek professional advice and gain a full understanding of what you are agreeing to before you do sign anything.

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