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Tips to Effectively Build Your Credit

Tips to Effectively Build Your Credit Hero Image
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By: Richard Verrillo
Navicore Solutions

February 27, 2024

Credit is an important factor of your financial life. It is a measure of your overall financial wellbeing and contributes greatly to many financial decisions. Having “good” credit can make way for a higher allowance on borrowing and more favorable lending terms. Your credit score stays with you throughout your life, established from the moment you take on your first credit card or loan. That’s why it is essential for consumers to have a strong understanding of credit and how to support a positive relationship with it.

Understanding credit and its role in your financial life

Credit is a measure of your ability to borrow money responsibly and pay it back. This is captured within your credit report and ultimately your credit score. Your credit score influences how lenders evaluate your creditworthiness and related lending terms, including interest rates and fees, whether you’re applying for a credit card, a car loan, mortgage, student loans, or personal loans. Your score can be referenced to assess your overall trustworthiness when it comes to renting a home, and employers can review your credit report before offering you a job.

It is important to know your credit score and to review your credit report regularly to ensure all information is accurate and there is no fraudulent activity in your name. The three main credit reporting companies are Equifax, Experian and TransUnion, and consumers are entitled to one free report per reporting body each year. The Consumer Financial Protection Bureau 2 is a great resource for related information, and your team at Affinity can help, too.

A smart approach to building and managing credit

A good rule of thumb is to keep your credit utilization rate under 30%, so your credit balances remain manageable. This also serves as a signal to lenders that you are a responsible borrower. As you use your credit card for purchases, you must be mindful of making on-time payments, as well. Credit cards can feel like an advance on your next paycheck, but you are borrowing - sometimes at a high interest rate - from the credit card company. Most credit cards will prompt you to make a minimum payment on your debt. More often than not, you should be paying your balance in full and striving to maintain a zero-balance on your credit card. Not only does this safeguard against mounting debt, but your payment history is a key component of your overall credit score.

Your credit score is more than just your credit cards, too. It reflects all of your borrowing, including student loans and auto loans, mortgages, personal loans and more. Be sure to vary the types of credit in your name and to use each type responsibly.

If you find yourself in trouble, find support in the right places

Having a solid credit history is truly essential to meeting your short- and long-term financial goals. But if you find yourself in trouble with your credit, it can feel very overwhelming. Fortunately, there are plenty of resources available to help.

Affinity partners with Navicore Solutions to offer free credit counseling and house counseling services for our members. Navicore is a national leader in nonprofit financial counseling and its credit counselors are certified by the National Foundation for Credit Counseling. They have undergone a series of rigorous examinations on credit and money management, and provide personalized, comprehensive and confidential counseling services that are focused on helping members eliminate debt and achieve financial stability.

Building credit requires patience, discipline, and a strategic approach. By starting early, making payments on time, managing your credit utilization, diversifying your credit, and avoiding common pitfalls, you can build a solid credit foundation.

This information is for informational purposes only, is intended to provide general guidance, and does not constitute legal, tax, or financial advice. Each person's circumstances are different and may not apply to the specific information provided. You should seek the advice of a financial professional, tax consultant, and/or legal counsel to discuss your specific needs before making any financial or other commitments regarding the matters related to your condition.