Getting Comfortable with Credit

Credit. Depending on your experience, that word could have negative or positive connotations. However, credit can work to your advantage if you use it wisely.  

What Should I Know About Credit?

Credit is a loan. Financial institutions offer consumers credit to streamline expenses and increase purchasing power and flexibility. Often, people use credit to finance large purchases like homes, cars, and higher education. If you can’t pay back the amount borrowed right away, you accrue interest.

Why Should I Know About Credit?

Credit is an important tool in the world of personal finance. In addition to increasing your purchasing power, building credit is an important step in raising your credit score. A number between 300 and 850 (higher = better), your credit score is determined by:

1. Payment history: pay your full balance, on time, to increase your credit score
2. Balances owed: outstanding balances reflect poorly on your credit score
3. Length of credit history: start building credit early to prove you have experience
4. Types of credit used: diversifying the types of credit you use (student loans, credit cards, auto loans) can boost your score, but that doesn’t mean you should take out a bunch of loans!

Payment history is the most important factor determining your credit score.

Who Knows About My Credit?

A few different entities will search your credit score:

• Landlords and/or property managers
• Credit card companies
• Credit unions/financial institutions
• Prospective employers

How Do I Build Healthy Credit?

Follow these steps to build credit in a healthy way:

• Create a budget: this provides you with a clear picture of how much credit you can afford to use. UW Credit Union members have access to budgeting tools to help you get started.
• Open one credit card: research, compare rewards/fees/interest rates, and find the best card that fits your lifestyle
• Use your card to spend within your means: remember that budget?
• Pay your balance in full, on time

When you establish a healthy relationship with credit and learn good financial habits from the start, you’ll open the doors to a financial future full of possibilities.

Get your credit score and full credit report for free in Web Branch when you become a UW Credit Union member.

UW Credit Union is committed to providing financial education, helping our members and communities build their financial savviness to make empowered decisions. We offer free learning seminars, confidential credit consultations and, through our partnership with Banzai, an impressive catalog of financial education resources.

Here for every you.