Building Your Credit in 6 Steps

One morning you wake up, walk out the door, go get in your car ready to conquer the day and all the sudden your car doesn’t start. You then sit back in your seat and think that maybe now is that time you get the new Mustang you have been thinking about for a while. So you get your friend to pick you up, and take you to the local Ford dealership so you can pick out the perfect one for you. As soon as you walk in the door, you see a shadow black ecoboost Mustang sitting there just asking for you to give it a good home. So you find the nearest salesman and start negotiating for the price that best fits your budget. Finally everything seems to be going right until they pull you credit. You sit back and sulk as your dreams of leasing that new Mustang fade off unto the abyss. Now the salesman starts showing you over to the used car lot where they keep all the cars under $10,000, so you can get approved for a loan with a 21% interest rate. So how do we prevent this?

 

1. Get your credit report
The first step to building your credit is to see where you stand. You can have bad credit because of medical bills or a student loan that you forgot about, and knowing what is effecting your score the most is the first step to building it back up.

2. Get a loan
One the most effective ways to building your credit is adding good marks to it. The easiest way to do this is by going to your local credit union and taking out a loan. You can even just put all that money in your checking account and using it to pay back the loan.

3. Get a Credit Card
Get on the computer an fill out an app for some credit cards and see what you can get. Credit Karma makes it easy where you can apply for multiple ones at once. Once you receive the card, make sure you keep the balance below 30% because credit utilization is a huge factor when it comes to your score.

4. Pay your bills
I know this one sound a bit redundant, however it is the most important rule when building your credit. Start paying those accounts that are negatively effecting your score.

5. Live within your means
I know it is all to tempting to take out a loan for a couch or something for your apartment, but rather than adding another bill to your plate, start saving up for the things you want. The best way to save is start by putting back 5% of each check and slowly start putting back more. Building a safety net and having a low debt to income ratio are necessities when building your credit.

6. Start Today
Don’t put off building your credit one more day. Starting today might seem impossible but with a little hard work and dedication it can be done.

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