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Tips to build your credit

Kick-start your credit with a secured credit card

Your credit score showcases your credit history and where you are right now in your financial journey. But it is important to remember, if your credit score is not what you want it to be, there are ways to manage your score.

Once you know your credit score, the first place to start is understanding your credit score and how it is calculated to make sure you aren’t creating habits that could negatively impact your score.

Potential ways to manage your credit score

Building your credit can take time. Whether you are just starting and have no credit history, or have less than great history, there are benefits to kick-starting your credit score. The practice of managing your score will come in handy when you are looking for a low-rate loan or credit card or preparing to make a big purchase.

Let’s take a look at a few tips to manage your credit:

  • Open a credit card – Opening a credit card is great to start building credit, but it is important to open the right credit card for you. A secured credit card is a good option to consider for those with low or no credit. To open a secured credit card, you would open the securing account, typically a savings account or CD account, with a balance that usually matches the credit line you are requesting. With a secured card, the deposit you make secures the credit card and allows you to obtain a credit card that you may not otherwise qualify for. Typically, you aren’t able to withdraw the money you deposited as long as your secured credit card is active.

    After the deposit is made, a secured card works similarly to a traditional credit card. When you spend money with your card and pay bills, that activity is reported to the three major credit bureaus. A key factor in calculating your credit score is payment history, so with responsible and consistent use of a secured credit card, you could see your credit score change over time.
  • Don’t use too much available credit – Once you open a credit card, make sure you don’t overuse it. A good rule of thumb is to never use more than 30% to 40% of your total revolving credit lines. Don’t apply for more than 6 lines of credit in 6 months. When you apply for multiple loans, the high number of credit inquiries can hurt your credit score.

    If you have credit cards, it is important to pay them off, but the next critical step is to consider whether you should close the account. By keeping those accounts open, you are maintaining your credit history. Make sure you check the details on the account to ensure you are getting the appropriate benefits.
  • Request a credit line increase – If you are struggling to stay under 30 – 40% of your credit lines, consider requesting a credit line increase on an existing credit card. The extra credit on your account will reduce how much of your credit line you are using if you maintain the same spending. As always, remember to check the details and make sure you understand all of the requirements before requesting an increase.

Let’s review:

There is no shortcut to obtain credit. It is important to keep track of your credit score and the Simmons Bank app offers a credit monitoring tool, powered by Experian to help you keep up with your Vantage 3.0 credit score.  Additionally, we offer a secured credit card called The Simmons Bank Foundation Visa to help you establish your credit. Contact us today and we can help you get started!

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