Establish Credit

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Establishing good credit starts with creating good habits around managing your money. It is important to show that you are responsible when it comes to your finances. So how do you begin to establish credit when you don’t have any? 

  1. Open a Checking Account. Open a checking account and manage it well. When you are ready to apply for a credit card, you can present your checking account as an example of how well you manage your money.  
    Resource Article: How To Use And Manage Your Checking Account
  2. Apply For a Low Limit or Secured Credit Card. If you are 21 years of age and have a job with an income that will support a credit card payment, you might consider applying for a low limit ($500) or a Share Secured credit card. Either option represents less risk to the financial institution and gives you an opportunity to prove yourself. To help build your credit score, pay your balance off monthly, make your payments on time and avoid charging to your limit and staying there. Within six months, you are on your way to building credit. 
  3. Apply For a Savings Secured Loan. Savings secured loans are secured 100% by funds in your Westerra savings or Certificate of Deposit (CD). The interest rate is typically lower because the loan is secured. Also, you continue to earn interest on your CD pledged as collateral.  When the loan is paid in full, the hold on your savings is released. Six months of good payments on this type of loan is a great start!
    Resource Article: Building Credit? Try A Secured Credit Card 
  4. Get a Co-Signer. You can also get an unsecured loan by obtaining a co-signer. This is an important commitment, because if you do not fulfill your payment obligations, the co-signer is responsible.

Building Your Credit Score
Here are some key points to help you build and maintain a strong credit score:

  1. Make your payments on time, 100% of the time.
  2. Keep your credit utilization in check – when you utilize your full credit limit, this reduces your credit score.  Try to pay your monthly balance in full each month.  If this is not possible, then try to keep your balance around 30% of your credit limit.  
  3. Avoid applying for a lot of new credit within a short period of time.  This lowers the average age of your credit history and negatively impacts your score.
  4. Avoid closing out credit lines, unless you are getting rid of an annual fee, as this will impact your length of credit history and credit utilization and affect your credit score.

Resource Article: How to Manage Your Credit Score and Save Money

Keeping Track of Your Credit Score
Credit reporting agencies are required to provide you with a free credit report annually – annualcreditreport.com is a reputable site sponsored by Experian, TransUnion and Equifax, the three major reporting agencies.  

Schedule a Free Financial Checkup - Westerra will review your credit report with you and look for ways to help save you money and identify any opportunities to improve your credit score.  

Federally insured by NCUA. Equal Opportunity Lender.

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