Building Your Credit

How to Build Your Credit:
Remember, if you have a problematic credit history, building credit can take some time. Here are some steps to help you build your credit.

• Get a copy of your credit report and review it for errors. Take action to address any errors you find. (To see a sample dispute letter, look under “Credit Reporting” in the Information Booth.)
• Apply for a small loan at the bank, thrift, or credit union where you have checking and savings accounts.
• Apply for credit with a local store, such as a department store. They typically have a lower credit limit and a higher annual percentage rate (APR), but are generally more willing to lend you money. There is usually no fee for department store cards.
• Make a large down payment on a purchase and negotiate credit payments for the balance. If you do not have a credit history but have a large down payment, there is less risk you will not make the payments. For example, if you are buying a used car for $5,000 and have enough cash, you might consider making a down payment of $1,000-$3,000. Although the loan will be very small, it can prove you make your payments on time.
• You might ask a friend or relative with an established credit history to be a cosigner for you. A cosigner promises to repay the loan if you don’t. The lender should report the payment information for both you and the cosigner to the credit reporting agencies.
• Pay your bills on time. This will help establish a good credit history, so you can get credit in the future.
• You might ask the lender to review your history of making rent and utility payments to demonstrate your ability to pay.