Steps to Build Credit

This page is part of the LOVE Columbia information library website. To contact the organization listed below, please follow links or phone numbers given within the article.
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Content updated Nov. 13, 2023

1. Understand your regular monthly expenses and create and follow a budget. Once your monthly expenses are less than your income, you are ready to focus on building your credit!

   Budgeting Help:

   - Basic Budgeting Coaching - Love Columbia

   • Learn to track your expenses, create a budget, and stick to it!

   • Coaching offered as needed, typically 2-4 sessions.

   • Contact coaching@lovecolumbia.org or call (573) 256-7662, ext. 154, for more information.

   - Extra Mile Program - Love Columbia

   • Improve your money management skills and work to reduce debt, increase savings, follow a budget and more!

   • High accountability incentivized 16 week individual coaching program.

   • Contact coaching@lovecolumbiamo.org or call (573) 256-7662, ext. 154, for more information

2. Get and read your credit report. Reviewing your credit report will inform you of all existing lines of credit, collections, and debts in your name.

   • Ways to Access your Credit Report

     1. AnnualCreditReport.com You can request your report from each of the 3 nationwide credit reporting companies for free once every 12 months.

     2. ONLY use this resource one per year! Otherwise, you will be charged to receive your report.

   • Learn what makes up a FICO credit score

3. Make payments on credit cards/debts. Making regular, on-time payments on any credit cards or debts is a critical step in building a good score.

   • Tips:

     • Don’t get too close to your credit limit (the maximum amount of credit you can charge per cycle) when charging your credit card. Credit scoring models look at how close you are to being “maxed out.” For example, if you are reaching the maximum amount of money that you can charge to your credit card every month, this will negatively impact your score even if you pay the balance off on time.

     • Try to use no more than 30% of your total credit limit per cycle. For example, if you have one credit card with a limit of $1,000/month, try not to charge more than $300 to that card per month. This will help to increase your score.

     • Put payment due dates on your calendar or set reminders on your phone so that you don’t miss payments! Many credit card companies and banks will also allow you to sign up for text and email reminders for when you have a bill due.

4. Take steps to correct errors on your report. Errors on your credit report can happen. If you see an error on your report (for example, a credit card issued under your name that you did not open), you can dispute that error. You do not need a credit repair company or a lawyer to do this. You can submit these requests on your own.

5. Find the right products to improve your credit. There are several options for opening new lines of credit that are designed to help you improve your credit score.

   • Some of these options include

     • Secured Credit Cards

       • Apply for this card as you would a traditional credit card.

       • Once approved, you deposit a set amount of money (ranges from $50-$400, depending on the card issuer) with the credit card company.

       • The bank holds onto this deposit and extends a credit line matching the deposit amount.

       • Generally, you can build credit with a secured card.

       • We recommend that you charge a small amount each month and pay it off in full.

       • Again, always keep the total balance less than 30% of your credit limit in order to help your score. Many of these cards offer a “graduation” component, which allows you to move from a secured card to a traditional card seamlessly after establishing a pattern of consistent payments.

     • Credit Builder Loans (aka Savings Secured Loans)

       • With this option, you deposit a small amount in an account with a bank, which they then “loan” back to you.

       • You repay the bank in small payments each month for 6 to 24 months.

       • These payments are reported to the credit reporting companies.

       • If you make your payments on time each month, this can improve your credit score.

     • Retail Store Cards

       • Many gas stations, department stores, or retail chains offer credit cards.

       • These cards tend to be easier to obtain and typically offer lower credit lines than other traditional credit cards.

       • This combination makes this a good option if you are looking to build up a thin or nonexistent credit record.