Learning Center Blog

How to Build & Improve Credit

No credit? Not much credit? Poor credit? We can help you get to the credit score you want. Your credit score is one of the main determining factors of whether or not you are approved for a mortgage, are able to get your dream truck, and sometimes even whether or not you can snag that new job. When something has that much power over your financial freedom, it is important to take good care of it and help it grow. Whether you’re trying to build credit or help it bounce back from a mistake, the following are great products to get started:

Credit Union Products for Building and Repairing Credit

Secured Credit Cards

A secured credit card is a credit card that is secured by a cash deposit you make when you apply for the loan. The credit limit will be the same amount as the deposit that is securing the credit card. The card is used like a regular credit card, meaning you will incur interest on purchases if you do not pay the balance in full every month. If you do choose to pay the balance in full every month, secured credit cards are a great way to build your credit without spending any additional money. Secured credit cards are not meant to be used forever. Once you have built your credit up enough to qualify for an unsecured card, you can close the secured account and receive your deposit back.

Store Credit Cards

Store cards are often easier to obtain than regular credit cards and typically have lower credit limits. Store cards also usually come with some type of rewards to their respective store, which can be beneficial to you if you shop there often. These cards usually have high interest rates, so the best option is to pay the balance each month. If you can do this and find a store card without any annual fees, they are another great way to build your credit without spending any additional money.

Share Secured Loans

With a secured loan, the collateral is money in a savings account or a certificate of deposit. Just like with a secured credit card, the maximum amount of the loan is determined by the amount deposited in the savings account or certificate. The interest rate is typically higher than the amount you are earning on the account, but it is usually significantly lower than most other loan types.

“No Credit Check” Loans

If you don’t have money in your account that you want to put on hold for an extended period of time, there are still other options. Some banks and credit unions have small loans that do not require a credit check, but have other requirements. For example, Patriot Federal Credit Union offers a 12-month, $1,000 Express Signature Loan that requires no credit check, but has other conditions such as being a Patriot member for one year and a direct deposit of at least $500 monthly.

Tips for Using Credit

Once you’ve got yourself some credit, you have to take care of it in order to build up or repair your credit score. We’ve got some tips on the best way to build credit and help keep it as high as possible:

Check Your Credit Score Often

It is important to check it out in the beginning of building your credit, just to make sure all your information is correct, but as time goes on, it serves other purposes. Checking your credit report regularly helps you notice if there are ever any signs of identity theft or credit fraud. If you don’t check often, someone may be wreaking havoc on your credit for months without you knowing. While you’re trying to build or improve credit, it can also serve as positive reinforcement as you watch your credit score go up each month.

Make Payments on Time

Up to 40% of your credit score is based on payment history. This especially matters when you are trying to build credit because mistakes hit harder when there is less history. For example if you miss two of your first six credit card payments, you’re already down to a 66% for on time payments. Trying to build your credit up after a mistake has the same rule. If you already have a bad mark on your record, it takes more on-time payments to balance it out. One way to make sure you’re on time is to have the payments made automatically from your credit union account a few days after you get paid.

Keep Your Credit Utilization Low

If your credit card balances every month are more than 30% of your credit limits, your score is taking a hit. Even if you pay off the balance every month, it is likely your statement balance that is being reported to the credit bureau. Try to pre-pay some of the balances before your statement if you know you will be spending over 30% of your credit limit.

Request More Credit as Possible

If you’ve been doing well with a credit card for about a year or so, request a credit increase or open a new card. This will help decrease your debt-to-income ratio which can increase your credit score.

Avoid Applying for Too Many Accounts at Once

Every credit account you open is considered a hard pull on your credit. This typically makes your credit score drop a few points. If you are doing this over and over again in a short period of time, especially if you are being denied over and over, it is hurting your credit score.

Build or Repair Credit with a Loan from Patriot Federal Credit Union

Patriot is proud to offer our members products and services to help them achieve financial independence. Visit our website, call 717-263-4444, or stop in to one of our branches in Chambersburg, PA, Hagerstown, MD, or Waynesboro, PA to discuss the ways Patriot can help you reach your ideal credit score. Our friendly staff is waiting to give you more information on our secured VISA credit cards, share secured loans, and Express Signature Loans. Learn more today!