NEW YORK – The typical challenges of managing income and expenses continue to be significantly more difficult. Inflation continues to creep up while credit for the average family has become more stretched. This often snowballs into late payments on mortgages, car notes or credit cards.
Other people are trying to trim down pockets full of charge cards but are concerned their credit may be hurt. Conceptually, credit scores are simple. They measure how well you manage the size and timing of payments on debt and other obligations.
Credit scores are not only based upon historical habits managing debt, but also include the type of accounts, the amount of credit available, consistency of payments and opening new credit.
Whether trying to build credit for the first time, or repairing credit after hardship, here are some tips to consider:
Be patient. You will not create a great credit profile overnight. It takes years of consistently good habits. Consistency in paying bills is the most significant factor in your credit score.
Open a checking or savings account at a bank or credit union. Keep that account funded and active. Show the ability to consistently deposit and withdraw funds without bouncing checks all over town. The ability to increase balances over time is a good sign.
Build good credit by having bank accounts, utilities, cell phones and other monthly payments in your name. If you are young and live with a roommate, putting utilities or cable in your name can be an important first step.
Don’t borrow more than you can repay. However, bankers, auto finance companies, credit cards and other installment loan providers always aim to the high side in terms of what you are “pre-approved” for. Although this may allow you to rack up a ton of debt at the local car dealer or furniture store, it makes you subservient to those providers and decreases financial flexibility going forward. Just because they offer you a large credit limit, only take what you truly need.
Improve credit utilization. Credit utilization is one aspect of a credit report you can improve quickly. Credit utilization is calculated by dividing the total of your credit card balances by the total of all credit card limits. Keep credit utilization below 30%. You can improve utilization quickly by paying down credit card balances. Increasing overall credit limits can also help. However, be disciplined enough to manage it wisely.
Manage your credit cards. If a bank will not issue a regular credit card, request a secured one. A secured credit card has a low limit, i.e.: $500 offset by a $500 deposit at the financial institution. This is a very low risk for the issuing bank while building credit for you.
With any charge accounts, make payments on time. Missing a payment counts against you quickly.
If you can’t get a secured card, determine if you can be an authorized user on a card. See if you can be added to an existing account, but given your own card to use. The positive and longer-term track record for this account can be added to your credit report.
When using credit cards, strive for a happy medium. Don’t max out cards and don’t merely make minimum payments. Minimum payments convey weakness to a credit issuer. Show you can handle the opportunity and the obligation.
If you succeed in properly managing a credit card for at least a year, approach your card provider for an increased limit. Successfully managing a larger credit limit shows you can handle the increased responsibility while not abusing it.
Having many cards open at once can be a warning signal as it represents potential risk to lenders. Ironically, if you have several cards open and work to close them, this also hurts your credit. Don’t open more credit than reasonably needed. Otherwise, you can back yourself into a corner.
Consider consulting with a nonprofit credit counseling agency for budget advice, debt management plans, or other financial guidance. If you’re facing housing challenges or considering a mortgage, look for a HUD-approved housing counseling agency.
Lastly, pull your credit report annually (AnnualCreditReport.com). Make sure accounts and remarks are accurately reflected. If not, clarify or challenge any discrepancies. Furthermore, utilities, cell phone payments, etc. may not automatically be added to your credit report. As such, contact credit reporting agencies and request these accounts and payments be added to your report.
© Copyright, (c) 2025, The Victoria Advocate
Author fschmuff
