Finances FYI Presented by JPMorgan Chase
By Aaron Allen, The Portland Medium
To achieve and maintain financial health and create generational wealth, establishing and maintaining credit is one of the most important factors.
Having a good to excellent credit score shows that you have a track record of borrowing money responsibly, which is important to mortgage lenders, landlords, financial institutions, and more.
The higher your credit score, the lower your interest rates will be on credit cards and loans, helping you save money over time.
“Rebuilding your credit and how to build credit in modern times has become people’s resolutions,” says Shelia Winston, VP and Senior Business Consultant at JPMorgan Chase. “It is never too late to build your credit, and as you make your resolutions for 2024, I think this should be at the top of the list.”
“Not only will good credit help you have a happy new year in 2024, but also your hard work will pay off for many years to come,” Winston continued.
Building a credit history from scratch can feel challenging since you need credit to build credit. If you don’t have credit, you’re less likely to be approved for loans and credit cards, limiting your ability to make major purchases that create financial stability for yourself and your family.
How can you build credit without having credit? What does it mean to build credit? According to Winston, there is a credit measuring system attached to most, if not all consumers. A three-digit score is attached to our spending and payment habits that can impact your ability to acquire loans, buy a car, rent an apartment, and even land a new job.
“All consumers have a three-digit score between 300 and 850,” says Winston. “You want your score to be as high as possible, as lenders look at credit scores to make loan and credit decisions. A credit score consists of your payment history, available credit, total balances, the mix of credit types, length of credit history, and the frequency and amount of new credit you’re applying for.”
“If you don’t have a credit history or you’re rebuilding your credit, your credit score will likely be on the lower end,” Winston adds.
When it comes to improving your credit score, Winston offered a few suggestions, including some that you may already be doing, that can help start the year off on the right foot:
• Report rent or bill payments and pay on time. Ask a service provider, such as a landlord, to report payment activity to the credit bureaus. Also, remember to pay bills on time. Paying your utility bills, rent, credit cards, and loans on time can demonstrate fiscal responsibility to lenders.
• Apply for a store or gas card. Retailers and businesses often approve applicants with little credit history for a card. Store cards usually carry a higher interest rate, but payments still become part of your credit profile. Remember to try to pay off the balance each month to avoid racking up interest.
• Open a bank account and consider a new-to-credit card: Although checking and savings accounts don’t factor into your credit score, lenders can review them to see how fiscally responsible you are. And in the case of Chase Freedom Rise, which is designed for new-to-credit customers, having a Chase checking account increases your likelihood for approval.
• Become an authorized user or joint account holder. Ask a trusted family member or friend to be added to their credit card. You’ll get an extra card with your name on it, and activity from that card will be reflected on your credit report over time. Be sure this person has a good history of on-time payments and low credit utilization – if they have bad credit habits, it will reflect on your credit, too.
• Find a co-signer. Apply for credit jointly with someone who already has an established credit history. Remember, the co-signer is putting their credit on the line for you, so keep up with your payments and don’t overspend.
When resolving to build credit in 2024, these options can help you demonstrate your creditworthiness, and you may start seeing your score rise sooner than you might expect.
“Reestablishing your credit is very important because a lot of times people need to rebuild it and their score to a higher point to be approved,” says Winston. “In doing that, you need a starting point. You need to pull your credit reports; you can do that through Chase, on Credit Journey. That is going to give you a good idea of where your starting point is as far as scores and what you need to do.”
“Building a credit history from scratch can seem challenging, but everyone needs to build credit,” Winston concludes. “Why? Because it is going to help them out to be able to get ahead in life when it comes to making major purchases, their finances for their families, business loans for their business. You need to have credit to get to the next level, so you want to start looking at your credit sooner than later.”
Finances FYI is presented by JPMorgan Chase. JPMorgan Chase is making a $30 billion commitment over the next five years to address some of the largest drivers of the racial wealth divide.