One thing you’ll quickly come to realize is just how important of a role credit plays in your life—now and in the future. So, whether you’re trying to improve your credit, starting to build credit from scratch, or you’ve got limited credit history, we’re here to simplify it for you to help you get a better understanding of credit, how to build it, and how it impacts your overall financial picture.

While you can’t get a perfect credit score overnight, it is possible with a little hard work, commitment, and determination. You’ll start by establishing credit, and from there, it’s up to you to practice responsible credit habits throughout your lifetime that’ll help you earn a score that gets yeses from lenders. 

You’re probably wondering, “What exactly is credit?” “Why is it so important?” “How can I start building credit?” and “How do I maintain good credit?” These are all completely normal questions to ask. We’ll be getting down to the nitty gritty of credit and all those questions and more. Follow along to learn how you can establish good credit that’ll lead to a successful financial future.

The Importance of Good Credit

What is credit and why is it important? Credit can be defined as the ability to borrow money with the promise and understanding that you’ll repay it in the future, often with added interest. Your credit history determines your creditworthiness and reliability for lenders. When you have good credit, lenders are more likely to get you approved faster and with more favorable terms, such as lower interest rates and higher credit limits.

Having good credit is crucial when it comes to all the big, important purchases you’ll make over the course of your lifetime, like purchasing a car, buying a house, or getting a cell phone. Aside from that, your credit may also come into play when you land a new job. Establishing and maintaining good credit is undeniably important and shows lenders that you’re responsible and willing to repay the money they loan you. Plus, you’re creating a solid financial foundation for yourself.

So, whether you have yet to establish credit or need a fresh start, we’re here to help. Follow along with me on the blog as I share helpful tips on how to build good credit.

Review Your Credit Report

Your credit report is a detailed record of your personal credit history and should be reviewed, at the very least, on an annual basis. It will allow you to better understand your credit and what’s being collected by the three credit bureaus: Equifax, Experian, and TransUnion. Aside from personal information like your name, address, employer, and social security number, it can include current and previous credit accounts/loans (mortgage, credit cards, etc.), payment history, debts, credit limits, collection activity, liens, other credit inquiries, and more.

Viewing your credit report gives you the opportunity to actively work on areas that may need improvement, ensures that your information is being reported accurately, and helps you detect identity theft or fraud should it occur. If you find that information is being reported inaccurately, you’ll want to dispute it with the creditor and work with them to correct it. If you believe there has been fraudulent activity on your account, you’ll want to notify the creditor immediately, request that a fraud alert/freeze be placed on your account, and file a police report.

You can request your free annual credit report from all three credit bureaus every year.

Put Your Bank Account to Good Use

Having a bank account is the perfect way to take charge of your financial future and make progress toward your goals. Have an account where you’re a joint owner with your spouse or parents? Open your own account that’s exclusively yours. Don’t have a bank account at all yet? Now’s the most opportune time to open one. Opt for an account at your friendly neighborhood credit union (wink, wink). Credit unions, like GOLD, strive to go above and beyond to serve your financial needs, while providing you with quality products, services, and educational resources, and top notch member service.

Apply for a Credit Card

A great way to start building your credit history is to open a credit card in your name. As you use your card for purchases and make your monthly payments on time, your creditor will send your account history to the credit bureaus to be included in your credit report.

Stick with just one card at first, no matter how many seemingly great offers come your way. If you’ve got multiple credit cards right out of the gate, it’s not only more difficult to keep track of your spending and payment due dates, but it can also negatively impact your credit score. Lenders may be hesitant to extend more credit to you if you’ve already got a high credit limit due to multiple cards. Worse, if you get behind on payments, you’ll get hit with fees and negative history will go on your credit report. While credit cards are a great financial tool, credit card debt can start out small and quickly snowball, leaving you in a financial hole that’s difficult to climb out of.

You’ll also want to watch out for credit cards with fees (annual fees, balance transfer fees, and late fees), gimmicks, and teaser/high interest rates. Sure, credit cards with a 0% introductory APR (annual percentage rate) are nice during the promotional period, but after it ends, you could be hit with an extremely high APR. Credit card interest rates steadily change and can vary depending on card type, especially in today’s current economic climate. To give you a better idea, the current average interest rate you could be looking at after the 12-, 15-, or 18-month 0% APR period ends is a 17.92%, which is a significant bump from 0%.

Look for a credit card that will best suit your needs and personal financial situation while keeping your best interest at heart. Personally, I’d recommend the GOLD Credit Card. We’ve designed our card to be the best in your wallet, giving you the confidence you need to supercharge your spending power responsibly. We’re not here to dangle gimmicks, rates, and rewards; we’re here to focus on real benefits for you: super great rates. Our card gives you instant borrowing power with low, competitive variable rates that will never exceed 18%. But it doesn’t stop there. With our card, you’ll experience no introductory fees, no annual fees, and no teaser rates. And unlike other credit card providers, you won’t need to worry about being charged lofty fees for cash advances or balance transfers.

Apply online for the GOLD Credit Card, and make credit work harder for you, not against you.

Keep a Low Credit Card Balance

So, you've just got your new credit card, now what? First and foremost, keep your card balance low. Don't max it out by getting overly spend-happy too quickly, especially if it's your first-ever (or a brand-new) line of credit. You've been approved for a reason, so be sure to put your card to use responsibly and wisely after all—your credit is on the line!

Use your card for smaller purchases and charge only what you know you can afford to pay off each month. By using your card strategically, you can avoid impulse buys and keep your credit utilization low. Wait, credit utilization … what’s that? We’ll explain. Credit utilization is how much credit you use versus how much total credit you have available. Most experts recommend you maintain a credit utilization that’s below 30%, but let’s dive in further. Let’s say you got approved for a credit limit of $2,000. If you charge $1,950 to your card, you’re at 95% credit utilization, which is much too high. Whereas, if you charge $600 to your card, then you’re at exactly 30% credit utilization. You should strive to be at or below 30% credit utilization to maintain a good or excellent credit score.

When your credit utilization decreases, your credit score will likely increase, which is ultimately what you want! This shows lenders that you’re financially responsible and able to honor your debt repayments. Over time, they’ll be more likely to increase your line of credit. And even further down the line when it’s time to finance a larger purchase, like your mortgage, you’re more likely to be approved, and for better rates and higher amounts.

Borrow Responsibly

Continue to build your credit by taking out other loans you may have a need for and add them into your credit mix. In the market for a new or used vehicle and need help with financing? Take out a vehicle loan. You can finance directly through the dealership, but you’ll typically find better rates and terms at your local credit union or other financial institution. If you’re planning a wedding, consolidating debt, or have home improvement projects on the horizon, then a personal loan may be a good fit for you. Personal loans provide you with the cash you need in one lump sum to help cover those major expenses. Taking out these kinds of loans also factor into your credit and help you build payment history. As long as you consistently make your loan payments on time each month, your credit will improve and increase. 

Some financial institutions even offer specialty loans designed specifically to help those with little or no credit to help establish a positive credit history. By borrowing even a small amount and making all of your payments on time, your activity will be reported to the credit bureaus to help you start building your credit. As long as you stay on a positive borrowing path, you’re bound to become a more desirable, low-risk client to lenders, which will ultimately result in stronger borrowing power and more appealing terms.

Pay Your Bills on Time

There’s no doubt that making loan payments on time and in full each month will help you maintain a financially healthy lifestyle. You may be thinking that missed or late payments won’t have too much of an effect on you now and you can just make up for it later in life. But we can sincerely tell you that it’s not that simple, nor is it something that you want to come back and haunt you in the future. Getting into the habit of consistently making late payments or missing payments altogether can have a negative impact on you now and later in life and could prevent you from getting a much needed loan down the road. For instance, late payments after 30 days or more and missed payments could stay on your credit report for as long as 7 years. 

Paying all your bills on time each month lowers your stress levels, helps you save more money, and yep, you’ve guessed it—allows you to maintain good credit and improve your credit score.

Trust in Automatic Bill Pay

Need a secure, convenient way to pay your bills? Set up automatic bill pay. It’s no secret that life can be hectic, and it’s easy for bills to slip through the cracks due to the hustle and bustle of your everyday life. But when you set up automatic bill pay, you’ll never feel the need to worry about missing a bill again. At GOLD, we make it easy for you to set up one-time, recurring, or future payments at your convenience. Give GOLD Bill Pay a try and set up all your bills ahead of time for next month to ensure that your bills get paid on time without you having to even bat an eye.

Let’s Build Your Credit!

Ready to get started and build credit? It’s go time! The key is to stay focused and use your credit wisely once you have it. From there, you can enjoy watching your financial dreams become a reality.

All of us at GOLD are here for you and committed to helping you every step of the way. Your future is bright and we’ll give you the support you need to build good credit and achieve financial success.  

Give our lending team a call to discuss your financial situation and how we can help: 484-223-4216.

Darian Phillips

Darian Phillips

Darian is the Vice President of Lending at GOLD. She is responsible for directing and coordinating lending operations within the credit union. She implements and manages changes and improvements that improve our Members' overall experience. Darian loves being able to help our Members achieve their financial goals, whatever they may be. 

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Financial Wellness - September 19, 2022

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