Money 101 Building Your Credit Score

Improving your credit score can help you by providing better annual percentage rates on loans and help you qualify for a mortgage, lease, or auto loan. Here are some steps you can take to build your score.

• Paying your loans and other bills on time will positively impact your credit score.
• Peoples State Bank’s digital banking tools include BillPay, which allows you to set up recurring payments for bills with a set monthly payment or the ability to pay varying amounts on a schedule that you determine.
• While you should always pay at least the minimum payment, paying your bill in full every month is recommended. It helps your credit score because it shows the ability to pay while lowering the amount you owe versus your credit limits.
• When you apply for credit, an inquiry appears on your credit report. These inquiries will “ding” your credit score by about five points, although it will bounce back within six to 12 months. Try to limit how many accounts you open in a short period.
• If you’re starting out, you might not have a credit history. Build it wisely by applying for “No Credit Needed” payment options or look for secured credit card options.
• Utility bills that are in your name can help you build credit. So can store credit cards. But be careful with store credit cards as they sometimes have very high interest rates, so if you carry a balance from month to month, you’ll pay more for the credit.
• Buy items wisely and try to pay your credit in total on those cards with high interest rates.
• Many credit scoring models look at how close you are to being “maxed” with your available credit. Try to keep your balances low compared to your total credit. Scores improve when you have a long history of credit and payments.
• Sometimes closing a card you’ve had for a long time will negatively impact your score.
• Review your credit report annually, and if you see errors, try to have them corrected. If you believe you can’t repay your creditors, contact them immediately and explain your situation. Ask about renegotiating the terms of your loan, including the amount you repay. Reputable credit counseling organizations can help you develop a personalized plan to solve your money problems. If you have a problem with credit reporting, you can file a complaint with the Consumer Financial Protection Bureau. 

You can learn more about credit and finances from a Peoples personal banker.