Building a Credit Score From Scratch

Young adults starting out on their own often bump into a cold fact of financial life: Having no credit history can limit your options just as much as having bad credit does. Lenders, rental offices and insurance companies use your financial track record to judge how likely you are to pay debts and bills — and if you’re a blank slate, you’re generally considered a risk.

Fortunately, there are some simple steps you can take to quickly establish your credit record.

Start with a credit card

One of the quickest ways to develop a positive credit history is with a credit card, which lets you show that you handle small amounts of debt responsibly month after month. Even if you can’t qualify for a card on your own, there are ways to take advantage of this credit-building tool:

  • Recruit a co-signer. You might be able to get a card if someone with good credit — such as a parent — is willing to co-sign the application with you. You and your co-signer will be equally responsible for the charges you make, along with any late-payment fees or other penalties if you don’t make payments on time. Also, late or missed payments can damage your credit score and your co-signer’s, too. But every time you make a payment on time, it will shore up your credit history.
  • Become an authorized user. Another option is to ask a family member or significant other to add you to their credit account. First, though, make sure their bank reports activity by authorized users to the major credit bureaus — otherwise, this won’t help your credit score. And remember that here, too, your activity with the card can affect someone other than yourself.

Next steps

Once you have a card, your behavior with it will determine how high, and quickly, your credit score rises. To keep moving in the right direction:

  • Make on-time payments. The most common credit-scoring model is the FICO score, and it is based on a combination of factors. The biggest, making up 35% of your score, is your payment history. Pay all of your bills (not just your credit card) on time to keep your score rising.
  • Keep balances low. Try not to use your card up to or near your credit limit; it looks bad to creditors if your cards are maxed out. A good rule of thumb is to keep your balances at or below 30% of your total credit limit.
  • Don’t over-apply for cards. According to a recent NerdWallet study that included an analysis of millennials’ credit scores, many young adults are applying for the wrong credit cards and getting rejected — and that’s hurting their credit, since excessive inquiries can make someone look like a bad credit risk. Apply only for cards you really want, and space out those applications.
  • Check your credit reports. You have the right to get a copy of your credit report from each of the three major reporting agencies — ExperianEquifax and TransUnion — once a year for free. Review yours and report any errors that might hurt your score.

It can be easier to build up good credit if you have a professional helping you. Consider consulting with a financial institution to help figure out the best way to establish credit and make other important financial decisions.

© Copyright 2016 NerdWallet, Inc. All Rights Reserved

Advertisements

America Saves Week: Making Savings Automatic

Americans have a hard time saving money. According to a report from the Pew Charitable Trusts, the typical household cannot replace even one month of income with liquid savings.

If building an emergency savings fund is one of your goals for 2018, join thousands of others during America Saves Week–February 26 through March 3, 2018–and step up your savings.

America Saves Week is coordinated by America Saves and the American Savings Education Council to promote good savings behavior.

No matter your financial situation or how much you earn, you can save. Even the smallest amounts tucked away regularly will accumulate into a nice savings cushion.

Set a goal. Make a plan. Save automatically.

Copyright 2018 Credit Union National Association Inc. Information subject to change without notice. For use with members of a single credit union. All other rights reserved.

How to shop for the best deals on groceries

In a time when most Americans are living paycheck to paycheck, many times having to choose between paying a bill and buying food for the week, getting a good deal on groceries is important.

Ohioans are actively strategizing to save money at the grocery store, according to an Ohio Credit Union League Consumer Survey. About 71 percent of shoppers will comparison shop before putting an item in their cart, 68 percent utilize digital coupons, while 60 percent use printed ones. Another 59 percent will stock up on items if the deal is good enough. In fact, deals may dictate whether consumers show up to a store at all. Approximately 44 percent of shoppers said they check store deals before heading out to get their groceries.

Sometimes, those consumers will check more than one store, and they’re switching up where they shop based on what they find. About 38 percent of respondents indicated they research before shopping and hit multiple stores depending on the sales at each. The other 62 percent say they stay loyal to one grocery store or chain.

Historically Americans have remained largely loyal to one main grocery store, but in the age of rapid communication and growing options, that’s been shifting. A 2017 report from the Food Marketing Institute confirmed that trend stating traditional grocery stores have continued a slow and steady decline as a primary store for shoppers, while shoppers with no primary store continue to increase and spread their money across traditional supermarkets, natural and organic stores, ethnic groceries, and online-only retailers.

As the cost of living continues to increase, the desire to save money does as well. Here are some tips to help you shop the aisles and fill your cupboards with the best deals.

  • Plan meals according to what’s on sale. Research the best deals at local stores before you assemble the week’s meal plan. First, scan your potential grocery stores for deals on protein, which is primarily the most expensive part of the meal. Next, be on the lookout for good deals on potential side dishes. Lastly, stock up on pantry staples when they’re on sale.
  • Make a price book. The best way to know when to stock up on a good deal is to know what the item usually coats. Track how much the items you typically buy cost at each store, that way you’ll know which stores have the best prices and will be able to identify a great deal when it comes along.
  • Be loyal to where you get the best value. If you’re shopping at one store because it’s cheapest, you may not be getting the best value. Product quality is also important. It doesn’t matter if you’re paying pennies for produce if it’s not fresh or goes bad quickly. Factor both price and quality into deciding which stores give you the best value.
  • Learn how to maximize your coupons. Use coupons for items you only would have purchased, anyway. Don’t buy something not on your list just because you found a great coupon. Many brands and chain stores offer digital coupons customized from your past purchases. Shoppers can also search sites like com by category to help find the most useful coupons for them.
  • Use technology to compare. Some chain stores show grocery prices on their websites, but this isn’t consistent across the board. However, websites like My Grocery Deals and Deals to Meals allow you to build a grocery list. The sites will use your list to find the best deals across multiple stores. Deals to Meals allows customers to create a weekly meal plan based on local deals, too.

To learn more about how a credit union can help you budget for monthly expenses, visit www.aSmarterChoice.org and find a credit union in your area.