Building your credit history now, the right way, ensures you'll be able to qualify for various types of credit in the future. To establish good credit, always pay your bills on time, keep your balances low, and try not to apply for too much credit at one time. Here are a few ways to immediately start building your credit history.
- Open a savings and/or checking account.
After you have maintained a checking or savings account for at least six months, apply for a credit card.
- Apply for a Navy Federal credit card.
But remember, each time you apply for credit, it will be reported to the credit bureaus as an inquiry—too many inquiries about your credit record in a short amount of time will make potential lenders cautious.
- Take out a small loan.
If you can't get a personal loan (no collateral is needed, just your signature), ask for a savings-secured loan (the money in your savings account is frozen while you are borrowing their money), or apply for a secured loan (a paid-for possession like a car is used for collateral). If you aren't able to qualify for a loan on your own, ask a relative or friend to cosign a loan with you.
All You Need to Know About Credit Reports and Credit Scores
A credit report is a lot like a report card—it showcases your strengths and weaknesses and, yes, it can affect whether you get a job, a loan, or a place to live. Credit reports include:
- Personal Information. You name, Social Security Number, birth date, current and previous address, and current and previous employers.
- Credit History. When each account was opened, credit limits, loan amounts, balance due, monthly payments and timely or late payments.
- Public Records. Information from government sources like bankruptcy, court records, tax liens, monetary judgments and overdue child support.
- Inquiries. Anytime a person or company accesses your credit report, the inquiry is recorded and generally remains on your report for up to two years.
Don't forget to review your credit report annually. Request your credit report »
A credit score is a rating assigned to you based on information contained in your credit report. Scores generally range from 300 to 850. Your score is heavily determined by five factors:
- Your Payment History. Paying bills on time boosts your credit profile.
- Amount You Owe. The higher the debt load you carry, the lower your score.
- Length of Credit History. The longer your credit history, the higher your score.
- New Credit. Frequent credit applications or requests for your credit report by creditors raise red flags.
- Types of Credit. Having different types of credit (installment loans, charge cards, or lines of credit) is viewed positively.
Six Tips to Boost Your Credit Score
Lenders look to your credit score to predict future financial behavior. The higher your credit score, the easier it is to qualify for loans, rent an apartment, or even land a job or promotion.
- Pay Your Bills on Time. If you're struggling to make payments on time, ask your creditors about alternate payment arrangements and automatic bill pay.
- Pay Down Larger Debts First. Always try to pay more than just the minimum balance on credit cards. Start by tackling credit card balances that are approaching their limits. Once a balance is paid off, move on to the next highest balance. And remember to never charge any single credit card or credit line to the maximum.
- Avoid New Credit Applications. Only apply for new credit as needed and manage your existing credit responsibly.
- Limit Your Time Shopping for Loans. When you start shopping around for a car or mortgage loan, try to keep your inquiries within a 45-day period.
- Avoid Shifting Debt to Other Accounts. The best way to improve your score is by paying down your existing debt, not shifting it around.
- Report Any Errors. Make sure to review your credit report at least once a year, especially before applying for a loan. If you notice any errors, contact the creditor and credit bureaus immediately
A bankruptcy filing will remain on your credit report for up to 10 years. It can affect your ability to get credit and may also prevent you from getting a job. Keep in mind that even if you file for bankruptcy, some of your debts may not be forgiven and your belongings may be repossessed or sold to pay off existing debt.
Instead of filing, consider other, more positive solutions to your financial problems, such as our personal finance counseling. There is no charge for this service and assistance can be offered over the phone or in-person at select branches. Call us at 1-888-503-7106 (703-255-8492 in metro Washington, DC) for more information.
ID Theft & Online Security
ID theft is something we take seriously, and we want you to be prepared. Learning a few basic things about online security can go a long way in keeping you safe.