Key Takeaways

• • • • • • • • Credit cards can help build credit if you use them wisely.
              • There are ways to build credit without using a credit card.
              • Good credit habits make a big difference over time.

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    Building good credit is important for lots of reasons—employers and landlords, for example, often check credit. Buying a car or house requires good credit as well. But getting started can be tricky, since you usually need credit to get credit.

    Starting with a Credit Card

    A credit card can be a good way to establish a credit history if you exercise caution. It’s easy to accumulate debt that carries a high interest rate. Also, missed or late payments negatively affect your credit score. Always pay on time and try to pay off the full balance each month.

    A secured credit card is a smart first step. These cards require a cash balance (usually around $200), and that becomes your spending limit. Find one with a low annual fee that reports to all three credit bureaus (Equifax, Experian and TransUnion) for the maximum impact on your credit score. Once you’ve established a positive history with a secured card, you can switch to a traditional card.

    Starting without a Credit Card

    One way to build good credit without opening a credit card is a credit-builder loan, offered by select financial institutions and online lenders. With this loan, the bank holds your payments until the loan is paid off and then returns them to you. Your repayment history is reported to the credit bureaus, so on-time payments matter.

    You can also:

    • Use a co-signer with good credit on a loan or card (but remember, they’re responsible if you don’t pay).
    • Become an authorized user on someone else’s card and benefit from their good credit history. Just make sure the card reports to all three credit bureaus.

    Get Credit where Credit is Due

    Rent payments aren’t reported to the credit bureaus, but you can use a rent reporting service to share that information. Keep in mind that rent reporting services charge a fee and often require that your landlord participates. Check that the service you choose reports to all three credit bureaus.

    As Always, Build Good Habits

    Start with good credit habits now, and you’ll benefit for years to come.

    • If you use credit cards, watch your utilization, which is the percentage of your credit limits that you use. The lower the utilization, the better—less than 30 percent is the recommended amount.
    • Spacing out credit applications helps preserve your score. An individual application makes your score dip a little, but multiple applications at once can be damaging.
    • It seems counterintuitive, but keep your accounts open if possible. Closing accounts affects your credit utilization percentage.
    • Most importantly, pay your bills on time. Late payments linger on your credit report.

    Building good credit is possible, even when you start from scratch. No matter which method you choose, paying on time and keeping balances low will serve you well now and in the future. At Lake City Bank, we’re ready to help you get started. Drop in to one of our branch offices or explore the financial tools available in Lake City Bank Digital.