If you don’t have a credit history, it’s hard to get a loan, a credit card or even an apartment.
Finding the right formula to build great credit can be tricky for some… So how are you supposed to create this great credit history and show that you are responsible if no one will give you credit?
To start establishing credit, you need at least one account that has been open 6 months or longer and you need at least one creditor that reports your activity to the credit bureaus within the last six months. Pearl Hawaii Federal Credit Union has several tools available to you if you need help establishing credit.
PHFCU Secured Credit Card
If you’re building your credit score from scratch or trying to recover from a bad credit mishap, a good tool to help you build your credit is our PHFCU Secured Credit Card. A secured card is backed by the cash that you keep in your savings account, which you use as collateral. The amount you agree to have locked ($500 or more) will be the same as your credit limit. The card looks and is used like our PHFCU Classic Card and you can use it to make purchases just like a typical credit card. Once you close your secured card, the locked portion of cash that you agreed to use as collateral is released.
Share Secured Loan
This is a low rate balloon payment loan that is fully secured by the available cash on deposit with PHFCU with up to 5 year terms and up to 10 year repayment plans. The money you borrow is held in an account and portions are released as the loan is repaid. It’s a little like a forced savings plan where you have money in your savings, you receive a loan, and your payments are reported to the credit bureaus.
Become an authorized user on someone else’s credit card
A family member with good credit may be willing to add you as an authorized user on his or her card. As an authorized user, you’ll enjoy access to a credit card and you can build credit history. You should come to an agreement on how you will use the card before you’re added as an authorized user. If you are the family member with good credit though and choose to do this, please note that the person you are adding is not obligated to pay… You are.
Be a co-borrower on a loan
If there is a close family that you trust, they may add you as a co-borrower on their loan. If you do choose to do this route though, you will be obligated to pay the loan in the event your family member does not pay.
Build your score with good habits
- Make all of your payments on time (including your credit accounts and utility bills). Bills that go unpaid may go to a collection department, which could seriously hurt your credit.
- Keep your credit utilization low — utilization is your balance versus your credit limit. It is recommended paying your balance in full each month. If you do carry a balance, don’t let it exceed 30% of your credit limit.
- Avoid opening too many new accounts at once. New accounts lower your average account age, which makes up part of your credit score.
- Keep accounts open for as long as possible unless one of your unused cards has an annual fee.
- Check each of your credit reports annually for errors and discrepancies. You can get your free credit report yearly from: https://www.annualcreditreport.com/.