Two Easy Steps to Build Your Credit

So, you’ve reached the point in life where you need to establish your credit and start building your history and score. Congratulations! Credit can get a bad rap when it’s not handled well but if you do your homework and you’re ready to use it responsibly, credit can be used to your benefit. Here’s how.

Step 1: Get a Credit Card

This may seem like a “too-obvious” first step but it’s not one you should make lightly. Do your research. Since you don’t have anything established, you probably won’t qualify for a card with rewards (and if you do, read the fine print carefully). If you’re wary of signing up for a full-blown credit card but still want to earn rewards while establishing credit, apply for a card through a frequently visited and trusted retailer. Your interest rate will likely be higher but if you pay off your balance each month, you can build a good credit foundation without incurring interest charges.

If you’ve recently graduated from high school or are in college, a student-based credit card is certainly worth consideration if becoming an authorized user isn’t an option. While efforts have been made to stifle the more predatory marketing practices, you’ll still need to pay close attention to the details such as APR, fees and limits. You might also consider applying for a “secured” credit card through your financial institution. Secured means that you’ll have an account (checking or savings) tied to the credit card to serve as collateral. Talk to a financial expert about the best option for you based on your needs and habits.

Step 2: Be Responsible

Repeat after me: Do not to spend more than you earn. This financial wisdom holds especially true with credit cards. The most effective way to build an excellent credit score is to pay off your balance, on time, every month. Many first-time credit cardholders get into a good payment habit by setting up their monthly bills, such as cable, insurance or utilities, through their cards. If you’re putting a big purchase on your credit card, try to save up before you put money down and plan to put any extra funds toward the balance.

Lastly, you’ll want to monitor your credit report. You can access your report for free once a year, and it’s something you should definitely do. Not only will you learn your score, but you can also scan the report for errors, which do occur. Anything from a misspelled name to a wrong address can cause issues, so stay on top of your report as best you can.

And there you have it – a two-step process for building credit from scratch. Use common sense and if you need advice, there’s undoubtedly someone at your local credit union who would be happy to speak with you.

21 Things You Should Know About Money In Your 20s

In your 20s, anything is possible. At least, that’s what it feels like, right? For many, this decade means everything from graduating college and taking adventures to starting careers and families. With all these new beginnings, it’s equally important to start getting into some smart financial habits, too. Recently, we asked Missouri Credit Union employees what advice they wish they would have taken when they were in their 20s. Here’s what they had to say:

  1. Always enroll in the employers’ 401k plan, especially if they’re contributing or matching your deposits. –Jenn Clark, Personal Financial Officer
  1. Start saving for retirement with an IRA. –Tessa Wacker, Branch Manager
  1. You may think putting away $10 here and there will never add up but it does! Create special savings accounts for specific goals, like vacations or buying a home. –Sara Sauro, Branch Manager
  1. Open a college savings account on the day your kids are born. –Ross Smith, SVP/Operations
  1. I wish I had known how important credit is – I had no idea how much my credit score would affect my life. –Jessie Claycamp, Vault Teller
  1. Spend less and save more. –Cindy Campbell, AVP Retail Operations
  1. Follow the Rule of 72. Divide the interest rate into 72 and whatever the answer is will be how long it will take for your principal (starting sum) to double. –Jim Schepers, VP Human Resources
  1. Pay attention to your credit score. It could play a part in approving your apartment application and the amount of the deposit you may have to make. –Jenny Redmond, Teller Supervisor
  1. Never borrow or cosign for money unless you have every intention and ability to pay it back. Also, make sure you’re depositing funds into a savings account for the unexpected. If times get tough, stay in contact with your creditors. –Matt Langley, Collections Officer
  1. Start funding your 401K as soon as possible – you can take it with you no matter where you go. –Amanda Love, Branch Manager
  1. If your paycheck doesn’t cover your spending that means you don’t have the money. A credit card isn’t money; it’s debt. –Michael Taylor, Data Security Specialist
  1. Skip the daily coffee or soda and put that money into a savings account. Every time you accumulate $500, open a 60-month CD. –Norine Bailey, Personal Financial Officer
  1. It’s easier to build on zero, little or good credit than it is to repair bad credit. And bad credit will haunt you. –Jessie Kemble, Teller Supervisor
  1. I thought that I couldn’t save any money and had to live paycheck to paycheck, which isn’t the least bit true. Find a way to put away money – you’ll be grateful in the long run. –Margaret McDermott, SVP/Marketing
  1. Put more thought into planning for your retirement. The years go by quickly and your money will add up if you start early. –Debi Findley, Personal Financial Officer
  1. Make your payments on time. Those ‘little’ late fees add up and can take a big bite out of your finances. –Rachael Johnson, Collections Officer
  1. Have the money for your savings or 401k taken right out of your paycheck so you won’t see it or miss it. –Jackie Reehoff, Branch Manager
  1. Money doesn’t grow on trees. Prepare for the unexpected. –Karley Jeffrey, Real Estate Loan Representative
  1. Open only one – just ONE – major credit card and pay off balances as soon as possible. –Steph McDermott, AVP/Manager Call Center
  1. Life insurance is a necessity beyond what your job and loans offer. –Becca Varner, Personal Financial Officer
  1. Choose a career based on your passions, not on the projected salary. While money will make life a little easier, it will not necessarily make you happy. –Melinda Sirois, Call Center

MCU members, what advice do you wish you had taken when you were younger? Share your thoughts with us on Facebook and in the comment section below.

Keeping Your Credit Healthy

You eat fruits and vegetables to stay healthy and go to the gym to stay in shape. Having a credit card is no different and requires the same steady participation. Once you’ve established a line of credit, it’s your responsibility to stay actively involved. However, your diligence has its own rewards, such as lower APR rates and bonuses like cash back. Here are a few ways you can make sure your credit scores stay healthy.

Stay on It

Pay attention to what you’re spending. Too often, credit cards can feel like a free pass. Stay mindful of what and how much you purchase. When you get your statement, look it over and check for any inaccuracies to avoid being double-charged or becoming the victim of fraud (especially if you use your credit card for online shopping). Remember: you’re entitled to a free credit report once a year. Set a reminder on your calendar and stay informed.

Rethinking Repayment

A credit card isn’t for spending more than you earn. Think of your card as a 30-day loan that you need to pay back at the end of each month, and save accordingly. Of course, carrying a balance isn’t necessarily a bad thing but carrying a large balance can be. If you make a big purchase on your card, know how much you’ll need to repay each month to avoid additional interest charges.

Right on Time

One of the simplest and most effective ways you can keep your credit healthy is by making timely payments. Aside from hurting your credit score, the additional late fees can add up rapidly over the course of a year, costing you upwards of $300. For many, making more than one payment each month helps keep their credit in check, while helping sustain a steady cash flow for other expenses.

Thinking about opening a card or transferring a balance? Missouri Credit Union offers members a line of credit cards from Elan Credit Card Services. For more information, click here.