How to build, improve your credit | Business


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Your credit score can have a big impact on your finances. Simply put, a credit report is a collection of information about you provided by financial institutions from which you have borrowed money over time. There are three major credit bureaus where this information is reported: Equifax, Experian, and TransUnion.

Some of the data that the credit bureaus provide to potential lenders includes: Your name, address, date of birth, and social security number. Details of all outstanding loans from financial institutions and records such as judgments or bankruptcies will also appear.

Good credit, showing that you paid off your loans on time, usually stays on your credit report for seven years. Write-offs or when you don’t pay for something will also only stay on your report for seven years. The credit report is a snapshot of your financial situation at a given point in time. Utility bills are usually not included on your credit report.

Credit scores range from around 350 to almost 900, and the higher the better. Here are some tips to help you start building or improving your credit rating:

• Don’t be surprised by your score – federal law allows you to request a free copy of your credit report every 12 months. Go to rapportdecreditannuel.com/ to get yours and see how your score stacks up. You should also check it for any errors and contact the credit bureaus as needed.

• Make your payments on time – This is very important in maintaining or developing your credit history. Try to make your payment on the due date each month and certainly within the grace period before late fees are charged and a late payment is reported to the credit bureaus.

• Avoid Maximizing Credit Cards – If you are at the limit on all of your existing lines of credit, this could be a warning sign to potential lenders that you are not budgeting properly and may be a credit risk. Try to pay off balances as early as possible and leave enough room on credit cards for unforeseen emergencies.

Financial institutions use your credit score to determine the risk level of a loan and the likelihood that it will be paid off on time. The riskier (or lower) your credit score, the higher your interest rate and monthly payments are likely to be on large purchases. Over a period of several years, this could translate into paying thousands of dollars in additional interest on auto loans and other necessities.

If you are young and just starting out, you may want to apply to become an authorized user on your parents’ credit card account. As payments are made on time, this will be flagged and help you build your credit history. Low limit cards are also a good option as they are often capped at $ 500. Just make sure you make payments on time each month and avoid maxing out even a low limit card.

Young people who work part-time or receive cash gifts for their high school graduation may also consider setting up a savings account with small recurring deposits and taking out a loan against their savings to build up a savings account. credit. These “secured” loans generally have lower interest rates as well as smaller payments, which makes them more affordable.

The same goes for consumers with lower credit scores, who may be able to save part of their tax refund and borrow against it to avoid interest rate loans. high and improve their credit. If the savings account remains intact while the loan balance is paid off, the result is a savings opportunity.

Spending a little time figuring out what your credit rating is now and taking the time to improve it can make a big difference in the price your purchases end up costing you over time. Free financial calculators and educational resources are available on the Abbound Credit Union website for your use.

Take advantage of the summer and use some of your free time to continue building your financial literacy and credit score.

Becky Ates is Executive Vice President of Abbound Credit Union.

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