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The Basics of Building Credit

Good credit is essential if you want to be able to make big purchases throughout your life, like a car or a home.

If you don’t have any credit history or are just starting out on your financial journey, those first few steps in your life can be difficult. Or if your credit has been ruined, it can be a difficult journey to rebuild it. We’re here to help with a little background and a few resources that can help you establish or repair your credit!

What's a Credit Score?

A credit score measures your credit activity. It’s often referred to as a FICO score (Fair Isaac Corporation or FICO is the most common provider of credit score models). If you are just starting out or have poor credit history, it can be difficult to get a loan, a credit card, or even an apartment.

To have a FICO score, you will need at least one credit account that’s been open six months or longer, with the creditor reporting your monthly activity to the credit bureaus during that time.

What’s a Credit Report?

A credit report is a statement that has information about your credit accounts and history. This includes opening and closing dates, payments made on those accounts, and information about collections or bankruptcies. The most common type of accounts are credit cards, mortgages, and auto loans.

Your credit report contains your credit history, which is reported to the credit reporting bureaus by lenders who have extended credit to you. If the lender reports your information to a credit reporting agency, they are required to report accurate information, as required by federal law.

A credit report is used to estimate the credit risk that you represent as a potential borrower. Your FICO score may also be used to determine the interest rate you will be charged for loans.

There are three major credit bureaus: Experian, TransUnion, and Equifax. Each of these bureaus keeps a credit history on you and calculates a credit score based on your credit activity. You are entitled to one free copy of your credit report every 12 months from each of the three credit bureaus.

So, how can you get a copy of your credit report? You can order this online at, or call (877) 322-8228.

Ways to Establish or Repair Your Credit

  • Apply for a secured credit card, which is a card that is secured by a cash deposit.
  • Apply for a secured installment loan, which is a loan where you borrow a sum of money that is guaranteed by a cash deposit.
  • Ask a person with good credit (friend or family member) to co-sign with you on a loan or line of credit. Your co-signer’s good credit standing can be an additional guarantee of repayment for a lender.
  • Start with small requests.

Avoid These Dings to Your Credit

  • Missing loan payments
  • Maxing out your credit cards and only making the minimum payment
  • Applying for multiple loans
  • Not paying medical bills, student loans, etc.

Due to the importance of credit in today’s world, it’s a good idea to start building or repairing your credit as soon as possible, because you’ll likely need it when you move into your first place, buy your first car, or try to rent an apartment.

Whichever route you choose to go, make sure you do so in a way that will work towards earning you a good credit score:

  • Make your payments on time every month to show lenders that you are a responsible borrower.
  • Keep credit card balances well below their limits.

Get Your Finances in Shape with BALANCE

Northwest Community Credit Union partners with BALANCE* to offer our members this financial resource for free. We refer to BALANCE regularly to help you create a financial goal and learn the ways in which to achieve it. BALANCE also has experts that can give helpful tips and personalized methods to help start and/or rebuild your credit score for free.

We want to help you find the best path for your financial journey. If you have more questions about your credit or would like to talk to someone about where to start building it, come into a branch or give us a call at (800) 452-9515 to explore your options.

*BALANCE is not owned or operated by NWCU. BALANCE is a nonprofit certified by HUD to provide comprehensive housing counseling service and is accredited by the Council on Accreditation of Services for Families and Children, Inc.