Every person’s credit score is generated from an algorithm using the information in your credit report. It consists of payment history, amount of debt owed, length of credit history, types of credit used, and the pursuit of new credit. Scores range from 300 to 850. Lenders use your 3-digit credit score to determine if they will approve you for a mortgage. The higher the score, the better, because this indicates that you are less of a risk!

You can get a free annual credit report pretty quickly online, and checking it every year will enable you to better your score over time. Some methods to get you started:

  • Try secured credit cards: just like a traditional credit card, you use this to make daily purchases and can incur interest. This type of credit-building card is backed by a deposit. When you close the account, you get the deposit back.
  • Get a credit-building loan: offered by most financial institutions, this is a low-risk loan that places the money you borrow into a savings account. You will not be able to access the funds until you pay back the loan in full. At the end of the term, the bank or credit union will send a positive report to credit bureaus.
  • Get a co-signer on a credit card or loan: this only works if the co-signer already has excellent credit. But in the event of a payment lapse, remember that your co-signer must step in and fulfill any financial obligations.
  • Get an authorized user status on another person’s account: you will get your own credit card and will be able to make purchases and payments. Make sure that the main account holder is responsible for making payments on time or your credit score will be at risk.

Whether you’re just building new credit for the first time or you’re trying to rebuild a low score, positive financial habits will increase your credit. Do your best to make the minimum payments on time, keep balances low, and only apply for new credit when you really need it.


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