Build & Improve Your Credit Score

A good credit score is crucial to financial success. It can help you: 

• Get approved for credit cards 
• Get a cell phone plan 
• Rent an apartment or house
• Obtain lower rates on car and home insurance premiums 
• Get certain jobs 
• Get a loan to buy a house or car 
• Get the best interest rates and terms on credit cards and loans 
• And more! 

So how do you get a good credit score? There’s no magic formula or a quick way to establish or raise a credit score . But with some patience, discipline, and a few tips, you can improve your credit score and enjoy many financial milestones, such as buying a car or purchasing a home. So, without further ado, here are some tips that might help.  

Enroll in Credit Monitoring

Building your credit starts with knowing and understanding your score, creating goals, and then monitoring your credit as you take steps to improve it. And if you bank with Arkansas Federal, you have access to a free credit monitoring service, Credit IQ, housed within digital banking. You can get real-time notifications on credit changes and monitor your progress as often as needed without impacting your credit score. Again, it’s free and can help you gain a better understanding of your score.  

Apply for a Credit Builder Loan

A credit builder loan is a great way to establish or help repair credit history. Unlike a traditional loan, the funds are not immediately released to you. Instead, the loan amount is deposited into a savings account, and the funds are placed on hold. Then as you pay on the loan, your timely monthly payments are reported to the major credit bureaus helping you establish a positive credit history. Once the loan is paid in full, the loan’s original amount and any interest you earned is yours to keep! 

Consider a Secure Credit Card

If you have no credit or bad credit, lenders may not approve you for a regular credit card; that’s where a secure credit card comes in handy. It works just like a regular credit card, except you need a cash deposit upfront that typically matches your spending limit.  

For example, if you provide $500 upfront, your limit on the card is usually $500. Think of it like a security deposit you pay a landlord before renting an apartment. The deposit serves as protection for the issuer if you don’t pay back what is charged to the card. The lender protects itself while still letting you build up your credit history by reporting your credit usage to the major credit bureaus each month. It’s a win-win!  

Keep in mind, though, that it still works like a regular credit card. You can incur interest if you carry a balance. So, it’s best to use it each month to help your credit score, but only if you can pay the balance in full. Tip: you do not have to carry a balance month-to-month to build a good credit score. It’s about using credit responsibly. 

What happens to that $500 deposit? Use the card responsibly, and you can improve your credit enough to qualify for an unsecured card (one that doesn’t require a deposit). At this point, you can open an unsecured credit card and get your initial deposit back when you close the secure card account. 

Get Added as an Authorized User on Someone Else’s Credit Card  

Lastly, you may want to get added as an authorized user on a family member’s credit card. This may seem strange, but if you have a family member with good to excellent credit, ask if they’re willing to add you as an authorized user. If so, the card issuer will send the primary cardholder a card with your name on it. However, the primary cardholder is still responsible for paying all charges on the account, not you.  

This is a great option because card issuers often report the full payment history of the card, including the names of each cardholder, to the credit bureaus. Even if you never use the card, the effect on your credit is the same.  

The one caveat here is pretty straightforward: make sure the person you’re asking to add you to their card has a good credit score and makes payments on time. If their credit score declines due to activity associated with the card, your credit score will likely decline too. 

Bottom Line 

Building credit doesn’t have to be scary or overwhelming, and you’re not in it alone. As a member of Arkansas Federal, we’ll walk alongside you and help you evaluate your unique financial situation. From there, we’ll look for ways to help build or establish your credit. 

Drop by your local branch or call us at 800.456.3000 today for your complimentary financial checkup and tips!  

And if you haven’t already done so, enroll in Credit IQ. It’s free and easy to do so. Just log in to digital banking, select Credit IQ, and follow the steps.