Oct 15, 2021 / Credit
Whether opening up your first account, applying for your first credit card, or depositing your first paycheck, every financial journey starts with a single step. For most, these first financial steps are exciting and new. But for those with colorful credit—whose financial journeys may have taken them somewhere unexpected—fresh starts can be hard to find. And starting again can feel less exciting than exhausting. So, if you’re a financial beginner or a begin again-er, follow these four steps to build credit and start your financial journey on the right foot.
The first step in nearly every financial journey starts with picking the right financial partner. Your financial partner will be your go-to for financial advice and the provider for most of your financial products and services. It’s a big decision that can impact the direction of your financial journey, so choose wisely. Find a bank or credit union that’s a good fit for you. Find one that prioritizes financial beginners and begin again-ers—one that’s willing to support and educate local students and give great rates to those with colorful credit. Once you’ve done your research, open a checking, savings, and/or money market account. This can help you save money and facilitate financial transactions, including direct deposits, bill pay, and more.
One of the best ways to build or rebuild credit is to use a credit card wisely. Apply for a card with a great interest rate and start using it every month. Even more importantly, make sure you pay off your credit card every month. Make at least the minimum payment (more if you can) and always make sure to keep your credit utilization (your available credit to used credit ratio) below 30%. Doing this consistently can help you build credit over time. At first, you may want to consider putting specific purchases on your card every month—like gas for your car or recurring purchases like your phone bill and other utilities. This can help you know exactly what you’re purchasing and help you make a plan to pay off your credit card every month.
If you’ve picked the right financial partner, securing an auto loan should be easy. Even if you’ve never had a loan before, or you have colorful credit, the right lender should be able to work with you to find you a great rate on a loan you can love (almost as much as you love your car). Compare lenders and rates and find a judgment-free auto loan that’s affordable and fast and can help you build your credit with the fewest number of obstacles (high rates, hidden fees, etc.). Again, the key to building credit is to always make your payments on time. Never miss a payment and try your best never to be late. These slip-ups automatically get reported to the credit bureaus, and can have a significant impact on your credit score, especially if you’re just starting out or starting again.
In addition to the above (using your credit card wisely, keeping your credit utilization low, always paying loans on time), there are a few things you can do to make your financial journey a little less rocky. First, although it’s not a great idea to apply for multiple loans all at once (that can hurt your credit), you should keep existing credit accounts open. Especially for those begin again-ers, this can lengthen your credit age, which can help your overall credit score. Second, pay all your bills on time. This includes your utilities and other expenses that aren’t loans. Past due bills can be reported on your credit report, and can take time to correct. And speaking of credit reports, you should also try to check yours often. Make sure your credit score is always going in the right direction. Check to make sure there aren’t any entries on your credit report that aren’t yours. If you suspect a mistake or fraudulent activity on your credit report, contact the credit bureau or your financial institution immediately.
Whether you’re just starting out on your credit journey or you’re looking for a fresh start, these four practices can help you build credit and point you in the right direction (financially speaking) for the rest of your life. To learn more about finding a credit card, an auto loan, and a fantastic financial partner, check out our products and services online or stop by a branch today.