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How to Build Your Credit

Part 1: Setting Yourself up For Success

1. Check Your Current Score

First check your FICO score

There are many types of credit scores, but FICO is the most important that most lenders use to make decisions.

  • Many banks/credit card providers offer this for free to their users. Ask them.

  • If not use the free monthly service here: 🔗 FICO Score.

  • You will get your FICO score once a month

  • Don't sign up for any of their paid plans or paid features!

This is how your FICO score is calculated:

Second use a free monitoring service

  • You can monitor your score here: 🔗 Monitoring (CreditKarma)

  • It's not your FICO score, but it's still good to keep track of these other scores.

  • Those other scores are likely close to your FICO score.

2. Pay Past Due Accounts

Scan Your Report

  • Look on your report and see if you find any past due payments.

  • First, if possible pay the minimum payment. Prioritize longest overdue.

  • Second, if possible pay full balance of any over 8% interest. Prioritize the ones with the highest interest.

Why It Matters?

  • Your payment history heavily impacts your score.

  • Clearing debts reduced credit utilization.

3. Think on if you need a new Credit Card

No Credit Card Yet?

  • Start with a secured credit card; they’re easier to get.

  • The amount you deposit to them determines your limit.

  • Here is a list of options. We recommend the Capital One card.

Already Have a Card?

Current Card Evaluation: Are your existing cards meeting your needs?

  1. Adequate Credit Limit: Does your card's limit suit your spending without maxing out?

  2. Fee Assessment: Do the card's fees—annual, late payment, or others—seem fair?

  3. Rewards Match Spending: Does your card offer benefits that align with your frequent purchases, like travel or dining rewards?

Here is a good list of some of the best cards for different credit score ranges

If you've had the same credit card for a while and have maintain a good credit history since you got it you can also request a credit line increase from them.

Avoid Excessive Hard Inquiries: Each credit card application equals a hard inquiry, temporarily hurting your credit score. Spread out your applications and wait for one response before initiating another.

4. Potentially request a credit line increase

Benefits of More Credit

  • Boosts total credit available, which can lower credit utilization if you don’t increase spending.

  • Diversify rewards and benefits.

When to Consider:

  • You've used your card responsibly for 6-12 months.

  • Your income is stable or has recently increased.

  • Your current limits don't match your typical expenses.

Part 2: Credit Best Practices

How to Use

Set Automatic Payments

  • Auto-pay ensures you don't miss due dates.

  • Ideally set up auto-pay for the full balance but if that's not possible set it up to pay the minimum payment to avoid being in bad standing.

Strive for Zero Debt

  • Pay your full balance in each month.

  • Unless it's an absolute emergency you want to avoid keeping any credit. card debt. Interest rates a very high on credit cards.

Use Them Often for What You Can Afford

  • For regular, budgeted purchases and to earn rewards or points.

  • Ideally avoid a credit utilization rate over 30%

  • That means keeping a balance on your cards over 30% more than your total credit limit available between all your cards

  • It's ok to use up your cards full balance and pay it down multiple times per month.

Or In Emergencies

  • When you have no other way to pay, a credit card maybe your best option.

Check Your Score Often

  • Keep a close eye on your credit score using the two services we mentioned right at the beginning of this post.

  • Don't give up on checking it and don't get discouraged if it is not moving up quickly.

  • If you se any issues on it or mistakes make sure to address that with whichever merchant or lender made the mistake.

Improving your credit score is a marathon not a sprint.

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