What’s in a number?

If you want to rent an apartment, get a loan to buy a home, or even apply for a job, there’s a good chance your credit rating will be checked. Your credit will affect many of the most important financial decisions you make throughout your life. While it may be financially responsible to pay cash it’s difficult to obtain credit or loan approval if you have no prior credit history because credit scores are used to determine your likelihood of paying.

Plan Ahead

It’s important to demonstrate you’re a reliable borrower. Financial institutions will look at your credit history to find out how much money you owe and if you are likely to pay on time. These two factors make up 65% of your FICO credit score. Scores range from 300 to 850 with excellent credit being 720 or higher. By paying your outstanding balance each month, lenders will see that you can handle your money and live within your means.

Follow these 7 steps to build your credit score:

1. Get a secured credit card: Opening a secured credit card for small purchases will help you establish credit. This does not include retail or gas cards, which can reduce your credit rating by 5 points.
2. Use 30% or less credit: Using your credit card will help you build your credit, but don’t overuse it. If your credit card has a $1,000 credit limit, use no more than $300 each statement period and pay it off fully each month.
3. Pay your bills on time: A missed or late payment could damage your credit. You may want to sign up for automatic payments to avoid interest charges and late fees, which ultimately lower a credit score.
4. Take out an auto loan: Auto loans take a higher priority in the credit structure since transportation is a necessity. Thus, this is a great way to increase your credit score.
5. Check your free credit score: Visit AnnualCreditReport.com to get your free credit report from the three major credit reporting agencies. Review it and report any errors immediately.
6. Keep your taxes in check: Missing a tax payment or a lack of payment can harm your credit score. Take advantage of electronic filing through your financial institution to pay the federal and IRS and state taxes.
7. Take out a mortgage: Most mortgages are paid over 15 to 30 years and will slowly increase your credit score. Spend time building your score before you take on a mortgage, as it may affect your rates.

Stay Calm

While building and maintaining good credit should be a part of your life, worrying about your credit score won’t help you qualify for a loan. A solid credit history, consistent on-time payments, and a low debt-to- credit ratio are the keys to qualification. With many loans, including mortgages, creditors want to feel confident you’re earning enough money to cover your payments.

A Share-Secured Credit Card can be the first step to building your credit score.