Credit Building 101: What You Need to Know to Get Started

Learn the basics of credit building and how to improve your credit score ⬆️

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Kickstart Your Credit-Building Journey

Whether you're just starting out or looking to improve your credit score, in this blog we'll give you the lowdown on credit building to help build your credit. We'll cover the essentials, provide practical tips, and empower you with the knowledge you need to embark on your credit-building journey. So, let's dive in and discover how to build your credit with confidence.

#1 Know Your Credit Score

Before you begin your credit-building journey, it's important to know where you stand. Your credit score is a numerical representation of your creditworthiness. Lenders use your credit score to decide whether to lend you money. If you’ve ever been rejected for credit, knowing and understanding your credit report can help you figure out why your score may be lower than required.

Equifax says a 'good' score is between 740 to 799, and 800 and up are considered 'excellent.'

It's calculated based on factors such as payment history, credit utilization, length of credit history, types of credit, and recent credit inquiries. You can get your free credit report by visiting AnnualCreditReport which is the only website authorized by the Federal Trade Commission (FTC) to provide free credit reports.

Getting a free credit report is an important step in managing your finances and ensuring that your credit history is accurate. By reviewing your credit report regularly, you can catch errors or fraud and take steps to correct them.

Here’s to taking control of your financial future 🤝

Woman standing on hill

#2 Establishing Credit

If you're new to the credit game, don't worry. There are several ways to start building credit from scratch. Consider applying for a secured credit card or becoming an authorized user on a family member's credit card. By making small purchases and paying off your balance in full and on time, you'll begin to build a positive credit history. Remember: This. Isn't. Free. Money 👀

#3 Responsible Credit Card Usage

Credit cards can be powerful tools for credit building, but they require responsible handling. If you decide to go down the credit card route, keep your utilization rate low by using only a small percentage of your available credit. Aim to pay off your balance in full each month to avoid interest charges and late payment fees. By doing so, you'll demonstrate financial discipline and build your credit in the process.

We love to see it 🙌

#4 Make Payments on Time

One of the most crucial aspects of credit building is making timely payments. Payment history contributes significantly to your credit score, so if you're serious about this whole building credit thing, pay your bills on time, every time. Set up reminders or automate payments to help you stay on track. Consistent on-time payments will establish a solid credit foundation and set you up for future success 🏠

#5 Keep Your Credit Utilization Low

Credit utilization is the percentage of your available credit that you're using. Aim to keep your credit utilization below 30% to maintain a healthy credit profile. High utilization can signal financial distress, which may negatively impact your credit score. By keeping your balances low and your utilization in check, you'll demonstrate responsible credit management.

#6 Patience and Persistence

Building credit is a journey that requires patience and persistence. The best things in life take time 💖

Establishing a solid credit history and improving your credit score doesn't happen overnight.

Remember that each positive action, such as making on-time payments or reducing your credit utilization, contributes to your overall credit health. Celebrate your progress along the way and stay committed to your credit-building goals.

#7 In Need of Professional Help?

If you're in a tricky financial situation right now and feel overwhelmed or unsure about your credit-building journey, know that there's help out there. Credit counseling agencies and financial advisors can provide guidance and support, helping you navigate the complexities of credit building. They can offer personalized strategies based on your unique financial situation and empower you to make informed decisions for your credit future.

Here's a list of agencies which may be able to offer you free advice:

  • National Foundation for Credit Counseling (NFCC): As the longest-serving nonprofit credit counseling organization in the U.S., the NFCC's mission is to promote financially responsible behavior. They offer a range of services, from bankruptcy counseling and education to housing counseling.
  • Consumer Credit Counseling Service (CCCS): CCCS provides budget counseling, educational programs, debt management assistance, and housing counseling. They have many branches throughout the country.
  • Money Management International (MMI): MMI is the largest nonprofit, full-service credit counseling agency in the U.S. They provide debt and budget counseling, credit report review, and a range of educational resources.
  • (Springboard Nonprofit Consumer Credit Management, Inc.): offers free credit counseling, and has been serving the community since 1974. They also offer free budget and credit advice, homebuyer education and foreclosure prevention programs, bankruptcy counseling and education, and student loan counseling.
  • InCharge Debt Solutions: This organization offers free credit counseling and education, and low-cost debt management programs. They also offer a variety of online resources.
  • GreenPath Financial Wellness: GreenPath provides free debt counseling that is personalized to your needs. They also offer debt management plans, housing counseling, student loan counseling, and financial education.

Remember that even with reputable organizations, it's important to understand any fees or obligations associated with their services. If you're looking for financial advisors, the Certified Financial Planner Board of Standards (CFP Board) provides a search tool for finding certified financial planners in your area.

#8 Understanding Credit Building

Building credit is like laying the foundation for a strong financial future. It's about establishing a positive credit history that lenders and creditors can use to evaluate your creditworthiness. By responsibly managing credit accounts, you can boost your credit score, which will open doors to better loan terms, lower interest rates, and increased financial opportunities.

And if you're looking for something that can help you on your credit building journey, we've got just the thing.

Let us introduce you to ✨The Credit Builder Card**

Everyone deserves a chance to build credit, so that’s why Cleo’s created a card which is completely focused on helping you improve your score and to build credit history.‍‍

And unlike traditional cards, it actually has your back and you’ll never be charged any of that dumb interest.

Want to start building your credit? Here's How to Build Credit History with The Credit Builder Card.

Budget to Help You Stay on Track

Budgeting plays an important role in building credit for a few reasons:

  • Debt Management: Budgeting helps you manage and pay down your existing debts such as credit cards, loans, or mortgages.
  • Prevents Over-borrowing: A well-planned budget can discourage you from taking on more debt. Over-borrowing can lead to missed payments and increased debt which can negatively impact your credit score.
  • Emergency Fund: By including savings for an emergency fund in your budget, you'll be better prepared to handle unexpected expenses.

If you're new to budgeting and not sure where to start, Cleo's the ultimate AI money app to keep you on top of your financial goals, helping you budget in a way that suits you. 💖

Getting started is easy. Here's how:

1) Get connected 🤝 – Download the free app, sign up, and connect your checking account. 
2) Income 💸 – Select your latest paycheck(s) so Cleo knows when you get paid.
3) Bills 👀 – Add your bills and double-check to see if they’re right so they can be tracked correctly.
4) Spend limit 🥡 – Set a realistic spend limit.
5) Deposit 🪙 – Add a $1 minimum deposit.

Each month, she'll show you how much money you’ve got coming in and how much money you’ve got going out. Cleo will also alert you when your bills are due and how much you’re spending on certain categories including:

💡 Bills
🎂 Groceries
🏦 Bank charges (hate you)
💰 Loans
🚆 Transport
🛍️ Shopping

Here's to Your Credit-Building Journey 👏

Congratulations, you've made the first step toward building your credit. Remember, building credit is a gradual process, but with discipline, responsible credit management, and a positive attitude, you can achieve your financial goals. Stay empowered, stay motivated, and watch your credit score soar, baby 🚀

Enjoy this post? Give it a share or send it along to a friend. You never know, it could make a big difference.‍
Big love. Cleo

**The Credit Builder Card is issued by WebBank, Member FDIC pursuant to a license from Visa USA Inc. Access to the Card is subject to approval

Still have questions? Find answers below.
What is a credit score and why is it important?
How can I build my credit from scratch?
What is the Credit Builder Card by Cleo?
How can Cleo help me with my budget and credit-building journey?
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