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Considering Credit

In the financial world, credit is the scale that financial institutions use to predict how likely you are to follow through with financial responsibilities such as paying back a loan. Apart from the money you have in your checking and savings accounts, credit serves as another way of making purchases, and should be factored into your financial goals.

Of course, when you’re new to finances, you haven’t had a chance to build much credit, so there are a few tools that can help you jumpstart the process:

Credit Cards
Credit cards can be risky business if you’re a shopaholic, but if you’re able to control the urge to spend on things you don’t need, paying off a credit card balance each month shows lenders that you will repay the debt you take on. And if you pay off the entire balance on time each month, you won’t even have to pay interest!
Loans
If you have student loans or an auto loan, your payments will help build your credit, so make sure you pay them on time! If you’re not able to get approved for a loan because you haven’t established credit yet, you may consider opening a Certificate of Deposit (CD) and borrowing against it. Since your money is already there, you will be able to get approval even without having much established credit, and as you pay the loan back, you’ll begin building your credit score.
Other Bills
Apart from your credit cards and loans, if your monthly bills are in your name, some of them may be reported to credit bureaus and will be considered when a lender looks at your credit. Be sure and pay all your bills on time each month to prevent any negative marks on your credit report.

Your credit score frequently changes depending on your payment habits and loans, and it’s possible for mistakes to be made when lenders report things to the credit bureaus, so be sure and keep an eye on your credit report. Everyone is entitled to a free copy of their credit report every year by visiting annualcreditreport.com. Be sure and pull your report once each year to make sure there are no mistakes. This report will not have your actual credit score on it, but will give you a list of the items presented, both positive and negative, which allow lenders to make a decision about your creditworthiness.

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Federally insured by NCUA. National Credit Union Administration, a U.S. Government Agency – Member accounts are federally insured to at least $250,000 and backed by the full faith and credit of the United States Government.

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