How to Establish and Build your Credit

October 17, 2022

Establishing good credit is a key step towards buying a vehicle, purchasing a home, or applying for a personal loan. Credit offers both benefits and risks. One major risk is the overextension of your use of credit- unable to make the monthly payment.

What is Credit? Credit is the ability to borrow money or purchase goods or services with the understanding that you will pay it back. A credit agreement often comes with monthly payments, interest rates and penalties. Your credit history is going to determine your ability to obtain credit.

 How Does Credit Work? Once you borrow, you establish a record of your credit accounts, payment history, and the details of account management. This information is gathered by the three national credit reporting agencies (Equifax, Experian and TransUnion). Their data is used to calculate your credit score.

What are the benefits of good credit?
Good credit can give you access to more lending options with the best possible interest rates or loan agreement. Future service providers will use your credit history in their decision-making process.


Credit Scores

Your credit history determines your credit score and the probability that you will make your payments. Credit scores generally include varying percentages of your credit score:


  • 35% payment history
  • 30% of debt balance
  • 15% duration of credit history
  • 10% types of credit used
  • 10% credit searches or inquiries

Credit scores range from 300-850.

  • 300-599 is very bad
  • 600-649 is poor
  • 650-699 is fair
  • 700-749 is good
  • 750-799 is very good
  • 800-850 is excellent

How to Build Your Credit

Building credit involves maintaining a 30% or lower debt to credit ratio, budgeting, and making monthly payments on time.

Establishing Credit History

The first step is establishing your original line of credit. Here are tips to get started:

Teens under 18 years of age

  • Open a bank account and continue to make deposits
  • Have a parent or guardian cosign on a prepaid credit card
  • Establish car loan with an adult cosigner
  • Mobile phone bill put in your name

Young Adults (over 18 years of age)

  • Utilizing a secured credit card account by using your savings as collateral
  • Establish bills in your name
  • Compare student credit cards
  • Add overdraft protection to your bank account
  • With verifiable income, secure a car loan in your name
  • Apply for a credit-builder loan

Managing Your Credit to Increase your Credit Score

  • Make a budget and stick to it
  • Before securing credit, make sure you can afford monthly payments
  • Compare rates on various credit options
  • Stay within your credit limits
  • Always pay on time and pay more than the minimum
  • Have emergency funds available to cover monthly payments
  • Always monitor statements for fraudulent purchases


How to obtain a free credit report: – (877) 322 – 8228

 Credit Reporting Bureaus:


Order a credit report: 1-800-685-1111


Order a credit report: 1-888-397-3742


Order a credit report: 1-800-888-4213