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How to build or rebuild credit - Monday, September 1, 2014
Building credit has become a very popular topic and consumers want to know more.
How do you build credit?  What if you have no credit or bad credit?  How do you change your situation and start building credit? 

Credit is the ability to obtain goods or services before payment, based on the trust that payment will be made in the future.  Credit (and your corresponding credit score) is acquired by repaying loans which are reported to the credit bureaus.  This article clarifies how to improve your credit with existing accounts and explains how to build credit if you donít have any loan accounts currently established.

Pay on time:
35% of your score is based on the timeliness of your payments.  Pay at least the minimum on your bills by the due date and remember that the most recent two years of payment history impacts your score the most.

Pay down debt:
30% of your score is based on the amount of debt you carry.  Pay down credit card and loan balances and try to reduce the total amount of your overall debt.

Secured loans:
Secured loans are a great low-risk way for financial institutions to help people build credit.  You can use a deposit account, such as a savings or CD account, as collateral for this low-interest loan.  The amount of the loan is determined by the amount of money used as collateral.  This means that you have access to your collateral as you pay down your debt.  As you repay the loan you build your credit history, so be sure to pay on time!

Secured credit card:
Operating on the same principal as the secured loan, you use a deposit account as collateral for the amount of credit extended on the credit card.  The limit on the card is determined by the amount used as collateral, which can be as low as $500.  A secured credit card looks and operates just like an unsecured credit card, the bill arrives monthly and a minimum payment is expected by the due date.  You do not have to carry a balance from month to month to build credit, just use the card for purchases and pay the bill in full each month.   It can take as little as six to twelve months to build enough credit for the card to become unsecured!

How Neighbors can help:
Neighbors offers secured loans and credit cards.  Learn more online or stop by any branch for more information or to apply for a loan or credit card. 


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