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Budgets and Money

How to build good credit in 5 steps

A good credit score is crucial to becoming financially successful. Here are several tips to effectively build your credit score and create a solid financial future.
Personal financial planning from scratch: A credit building checklist If you're trying to create your personal financial plan with tactics other than saving money, you may want to think about building your credit. Here's a short credit building checklist to help get you started on creating a solid credit building financial plan.

Get a credit card

Your best bet in securing a credit card would be to go to your local bank or credit union and explain that you're trying to build your credit. Often they'll issue you an unsecured credit card with a low limit, allowing you to slowly establish your credit history. However, if you can't obtain an unsecured credit card, then opting for a secured card is your next move.

Use your credit card for small purchases

Did you know that 30 percent of your credit score is based on the balances that you're carrying on your credit cards? By using your credit card for small purchases, you can begin to establish a good payment history without getting too far in debt. It also makes it easier to pay the balance in full at the end of every month.

Pay your bill right away

Thirty-five percent of your credit score depends on your ability to pay your bills on time. It can be easy to misplace a billing statement and accidentally make late payments on your bill. For this reason, get in the habit of paying your bill the same day it arrives. If you pay your bill by check, this will allow it plenty of time for it to reach your creditor. If you prefer to receive online billing statements, many creditors will allow you to schedule a payment date ahead of time so that you can coordinate your payment with your pay days. You may even want to set reminders on your smartphone or mark your due date on your calendar for extra insurance.

Try applying for other loans or credit cards

Once you've begun to establish some credit, you'll want to mix things up a bit by testing the waters with other types of loans and/or credit. For example, you may try applying for an auto loan or retail store line of credit. However, be cautious not to overextend yourself and borrow wisely. It's true that you have to use credit to build credit, but it's important to remember that a little credit goes a long way.

Examine your credit report annually

There are a lot of different services that you can use to check on your credit report. However, by using a government-authorized website such as, you can get a free copy of your credit report every 12 months from all three reporting agencies to ensure that your report is correct and up to date. If you discover there are discrepancies, you'll want to follow the necessary steps to dispute your credit report findings.

By following these steps, you should begin to experience an improved credit score over time. For more information on creating a budget and creating a personal financial plan, visit the Protective Learning Center.



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All Learning Center articles are general summaries that can be used when considering your financial future at various life stages. The information presented is for educational purposes and is meant to supplement other information specific to your situation. It is not intended as investment advice and does not necessarily represent the opinion of Protective Life or its subsidiaries.

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