How to Build and Improve Your Credit

Understanding the Value of Good Credit

Good credit is more than just a number—it's a key that can unlock doors to financial opportunities throughout your life, from lower interest rates on loans and credit cards to approval for rental applications and more favorable insurance premiums. It reflects your financial responsibility to lenders and creditors, acting as an indicator of your ability to manage and repay debt.

Credit Scores: Why They Matter

Credit scores influence lenders' decisions on whether to extend credit to you and on what terms. A higher score can lead to better interest rates, saving you money over time.

Building Credit When You Have None

For those new to credit, the journey begins with establishing a credit history. This can seem daunting, but there are effective starting points to consider.

Secured Credit Cards As A Stepping Stone

Secured credit cards require a cash deposit that serves as your credit limit. They're a valuable tool for building credit, as they report your activity to credit bureaus, just like traditional cards. The best part is that they are significantly easier to obtain than typical credit cards, even for someone with no credit history.

Become an Authorized User on a Family Member’s Account

Another route to building credit is becoming an authorized user on a family member's credit card. This allows you to benefit from their good credit habits, as the account's history will be reported on your credit report as well.

Improving Existing Credit: Strategies That Work

Building on an existing credit foundation involves specific strategies that reinforce your creditworthiness over time. Here are practical steps you can take:

Pay Bills on Time, Every Time

Timely payment of bills is crucial for maintaining and improving your credit score. Setting up reminders or (even better) automatic payments can help ensure you never miss a due date, which is vital since payment history is the largest factor in determining your credit score. If you do set up automatic payments, just make sure you never put large purchases on the card that will overdraw your account when the automatic payment is processed. In fact, you should never charge more on your credit card than you have in your checking account. This leads us to the next tip:

Keep Your Credit Utilization Low

Credit utilization—how much of your total credit limit you have used compared to how much you have left available—is extremely important as well. The ratio of utilized to available credit should be kept below 30%. This shows lenders that you're not overly reliant on credit and that you have enough discipline not to overspend just because you have the credit available. Paying down balances and not maxing out credit cards are effective strategies to manage your utilization rate.

Limit New Credit Inquiries to a Minimum

Each time you apply for credit, a hard inquiry is made, which can slightly lower your credit score. To improve your credit, minimize the number of new credit applications. Only apply for new credit when it will be beneficial for your financial health.

The Role of Credit Diversity in Your Credit Score

Credit diversity, or credit mix, refers to the variety of credit accounts you manage, such as credit cards, student loans, auto loans, and mortgages. Credit bureaus favor a diverse set of credit accounts because it demonstrates your ability to handle different types of credit responsibly. Adding different types of credit, used judiciously, can positively influence your overall credit score.

Regularly Monitoring Your Credit Report for Accuracy

Regularly checking your credit report is essential for maintaining a healthy credit score. It allows you to verify that all information is accurate and up-to-date. You can identify any discrepancies (or fraudulent activities) early on. Most financial advisors recommend checking your credit report at least once a year, which you can do for free from each of the major credit bureaus.

Loans and Other Financial Tools

To further enhance your credit score, consider using a variety of financial tools such as personal loans, auto loans, or home mortgages. Each of these can contribute positively to your credit score when managed responsibly and without increasing your credit utilization too much. 

Patience and Persistence Pay Off

Improving your credit score is a journey that requires patience and persistence. Consistent efforts to make timely payments, reduce debts, and maintain credit health will gradually yield improvements. It's important to keep focused on your financial goals and not be discouraged by setbacks along the way.


Motivate yourself by setting and achieving more short-term goals on the way to the long-term goal of an amazing credit score. For example, if you are just starting out, then getting your first account could be your first goal. If your score is at 600, set a goal of improving it by 25 points. And remember that building a solid credit history is a long-term investment in your financial future.

Living Your Ideal Life with Ideal Credit Union

At Ideal Credit Union, we are dedicated to helping you achieve your financial goals. With a range of financial products and personalized advice, we support you in building and maintaining a strong credit score. Our commitment to your financial well-being ensures that you have the tools and resources needed to navigate your financial journey successfully. Join Ideal Credit Union and start paving the way to your Ideal Life!

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