Signing up for a credit card or a loan is pretty easy, but understanding how to build credit and maintain your financial stability can be hard. In this blog, we explore three essential tips to build credit long term!
Get a starter credit card
- Various banks and financial institutions (such as Westoba) offer various credit card options to fit the customer’s wants and needs. If this is your first time getting a credit card, we recommended starting with a card that offers a low-interest rate. In the long run, a low-interest credit card can save you money compared to other higher interest rate cards.
- If you would like to acquire a credit card with Westoba or want more info, visit one of our branches or call 1-877-WESTOBA.
Keep balances low/paying on time with credit cards
- Build credit faster by paying off your credit card balance at least two days prior to the due date. If you don’t pay off your balance by the due date, you’ll have to pay interest from the date you made a purchase. Paying your credit card balance in full each month tells lenders you are a responsible borrower.
- Keeping your credit card balance low is also very important. Maxing out your credit cards can have a negative effect on your personal credit score. The less you charge on your credit card, the better your credit will be!
Learn how credit reports and scores work
- Knowing how to read credit reports and scores is a crucial skill, especially if you want to build credit long term. Credit bureaus track your payment history, and then they supply this information to financial institutions and banks that issue credit cards and loans.
- A person’s credit history is used to calculate their credit score. Lenders use these credit scores to make the decision to lend or not to lend money to someone, and the interest rate they will charge on the loans.
- Keep your credit seeking to a minimum. If your credit is pulled frequently in a short period of time, it will negatively affect your credit score. Lenders can also see how often your credit has been pulled and where. It can look like you were shopping around for the best interest rate, or recently declined for a loan or credit card.
Lastly, remember that credit does not mean another source of extra income! Sometimes people have the misconception of what credit is and how it works, and they might find it as just another source of income. Credit does not give you more money to spend. When you make a credit card and/or loan payments, you actually have less money. It is important to not spend more money than you have.