Whether you’re new to credit, rebuilding credit or just want to know more about which factors impact your creditworthiness, here are some tips to help you build credit.
Understand your credit report and credit score
There are several different credit scoring models. FICO is widely used. Here's what goes into your Fico® Score and how each category is weighed:
Payment history: approximately 35%
Your payment history makes up a large portion of your FICO® Score, and for good reason – it lets lenders know whether you have a record of paying your debts on time.
Amounts owed: approximately 30%
Your FICO® Score considers your credit utilization rate, which is calculated by dividing the total amount of credit you’re using by your total available credit. The lower your utilization, the better. Using a high percentage of your available credit can be a red flag for lenders.
Length of credit history: approximately 15%
FICO® Scores account for credit history in several ways, including the age of your oldest account, age of your newest account and average age of accounts.
New credit: approximately 10%
New credit includes the number of hard inquiries on your account. (Hard inquiries usually happen when you apply for new credit.) If you apply for new credit frequently, credit companies may view you as a riskier customer.
Credit mix: approximately 10%
Your credit mix – or the types of credit you’re using – make up part of your FICO® Score. For example, you might have a mortgage, credit card, and personal loan. A diverse credit mix can indicate to a lender that you’re adept at managing different types of debt.
Check your credit report frequently
You can request a free credit report from each major credit bureau once every 12 months at annualcreditreport.com. When reviewing your credit reports, look for errors and indicators of fraud, as well as areas where you can improve.
Learn how credit cards work – and how they can work for you
Understanding basic credit card information can help you take advantage of the benefits of credit cards.
If you don't have a credit card, getting one can be a good way to start building credit. If you have little or no credit history, the best option may be to start with a secured card. Here are some other ways you can make credit cards work for you:
Understand the fine print
Not sure about the meaning of APR, variable rate and prime rate? Learn about important credit terms so you can decode the fine print on credit card offers and agreements.
Get the most from credit cards
Are you searching for a good balance transfer offer? Are you interested in finding a credit card with rewards that fit your lifestyle? Use our site's credit card comparison tool to help figure out which card best aligns with your goals.
Automate payments and alerts, and be consistent
Consistency is the key to building healthy credit, and automating your finances can help make this process easier. Here are some ways to stay on top of payments and be more efficient about paying off debt:
Consider automatic payments
Consider switching your recurring bills to automatic payments if you can. You'll avoid missing payment due dates if funds are automatically withdrawn from your bank account on scheduled dates before the bills are due.
Stay alert
Get text or email alerts from your credit card issuer in certain situations, such as when minimum payments are due, when payments are posted and when you're approaching your credit limit. This can help you stay on top of your finances.
Be methodical about paying off debt
Perhaps you're a recent college graduate struggling with loans or have gotten into too much credit card debt. If you're serious about paying down your debt, it's important to take stock of your finances, figure out how much you owe and develop a plan for making payments each month to get yourself back on track.
Disclosure: This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.
FICO is a registered trademark of Fair Isaac Corporation in the United States and other countries. Citi and Fair Isaac are not credit repair organizations as defined under federal or state law, including the Credit Repair Organizations Act. Citi and Fair Isaac do not provide ‘credit repair’ services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history or credit rating.
