How Does Credit Building Work?

Building good credit requires that you make regular, on-time payments on accounts that report to the major credit bureaus.

Have an account: To build credit, you must have at least one credit product open and in use. Click here to learn more about safe credit building products.

Keep it up: Continue to use your accounts regularly and pay bills on time. You need at least six months of history and activity on your credit report to keep and continue to improve your credit score. On time bill payment is the most important factor in your credit score.

Keep balances low: If you use a credit card, keep the amount you owe, called your balance, as low as possible, preferably below 30 percent.

Common Credit Myths

There are several false perceptions surrounding credit and how to properly use it. Take a look at some common myths and learn the facts.

Myth Busted!

Myth: I need to carry a balance on my credit card in order to build credit.
Busted: As long as you are using your credit card regularly, you do not need to carry a balance and incur interest charges to build credit.  You can pay the balance in full and avoid interest altogether! If you cannot pay the balance in full on your card, make sure to pay at least the minimum balance owed.

Myth Busted!

Myth: Closing my credit card account will boost my score
Busted: If you have a credit card you don’t use, you’re unlikely to improve your score by closing the account. In fact, closing the card might even lower your score. In general, credit scoring models don’t measure risk by how much credit you have available, but rather by how much of that credit you’re using — a ratio known as “credit utilization”. (Source: “11 Credit Myths: Don’t Fall for ‘Em”, Experian)

Myth Busted!

Myth: Checking your credit scores will impact them.
Busted: Checking out your credit scores and credit reports does not impact your credit scores. In fact, it’s a good habit to get into, and it’s especially important if you’re planning a large purchase such as a home or a vehicle, as you will be able to better understand your credit position before applying for a loan. (Source: “Credit Myths and Facts You Should Know”, Equifax)

Myth Busted!

Myth: Co-signing doesn’t mean you’re responsible for the account.
Busted:  If you open an account jointly or co-sign a loan, you will be held legally responsible for the account. Activity on the joint account is displayed on the credit reports of both account holders. (Source: “Credit Myths and Misconceptions, Transunion)

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