How to Build Good Credit

Buying a home is a big decision, and you might be thinking, “Can I really qualify for a home loan based on my current credit score?” Your creditworthiness can affect how much you can borrow, what interest rate you can obtain, and what loan program(s) you may qualify for.

When starting to build your credit, it’s a good idea to check your credit report to make sure it does not contain any inaccurate or fraudulent information. It is better to review your credit report before applying for a loan so you have an idea as to what your credit history will look like to a lender.

How Can You Build Your Credit?

  • Open a savings account — this can be seen as a sign of financial stability.
  • Use credit cards wisely — pay off your credit card every month so you will avoid fees and interest charges.
  • Do not apply for more credit than you need – credit applications can appear as inquiries on your credit report which can appear to lenders as taking on additional debt. These inquiries will appear on your credit report for up to two years.
  • Pay your bills on time — making a late payment may negatively affect your credit score and result in late fees.

If you find your credit score is lower than what you would like it to be, don’t worry! You can still take steps to help improve your credit. Keep in mind your score will not increase over night; you will have to be consistent with the following tips to see your credit score increase.

Ready to Improve Your Less Than Perfect Credit?

  • Pay EVERY bill on time — any bills that are more than 30 days late will be reported to the credit bureaus which can negatively affect your credit score.
  • Set up automatic payments — this help you to avoid late payments.
  • Do not charge or borrow more than you can afford — only use a small percentage of your credit limit that is within your budget so you know you can pay it back and avoid accumulating debt. Also, let your credit cards age so that you can build a history of making payments over a long period of time.

Still need help building your credit? Check out our Guide to Credit for additional tips!

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