70ºF

‘Money: It's Personal' — Building credit from scratch

SAN ANTONIO – Building credit from scratch can sometimes be confusing, but it doesn't have to be difficult.

While it may take some time to build credit, there are some steps you can take to get to the credit score you want.

The Consumer Financial Protection Bureau said applying for secured credit cards, credit builder loans or retail store cards are three ways to help your build your credit.

Let's break them down.

Secured Credit Cards

Secured credit cards allow you to deposit an amount of money, ranging from $50 to $300, into a separate account. The credit card company will hold onto the money and will offer you a credit line matching the deposit.

After an established pattern of payments, your card may be graduated to a traditional credit card.

As for the deposit, you'll want to ask your lender when you can get that back. Usually, customers get their deposit back after their first year with their secured card.

Credit Builder Loans

As for credit builder loans, the CFPB said financial institutions will deposit a small loan into a locked savings account and then you would pay the loan back in small-dollar payments for a fixed period of time.

When your loan matures, you'll get the accumulated money back. And your financial institution will notify the credit reporting companies about your payment history.

Retail Store Cards

Lastly, retail store cards, which are offered at many gas stations, department stores or other retail chains, tend to be easier to obtain and will typically offer lower credit lines than other credit cards.

The CFPB said you should remember to pay your credit card bills or loan payments on time to build a good credit score and you should also avoid getting too close to your credit limit.

Experts say you should use no more than 30 percent of your total credit limit.

Remember, you're entitled to a free credit report from each of the three national credit reporting companies every 12 months by visiting annualcreditreport.com.  

For tips from the Consumer Financial Protection Bureau, click here.

“Money: It’s Personal” is a series on KSAT’s News at 9 that breaks down personal finance topics. If you have a suggestion or question on they types of topics you'd like us to explain, click here.

For more stories from KSAT's News at 9, visit KSAT.com/newsat9.


About the Authors:

Ivan Herrera

Ivan Herrera has worked as a journalist in San Antonio for three years. With the creation of the News at 9 digital newscast and using his graduate education in business, he developed "Money: It's Personal," a weekly series that breaks down personal finance topics. Before living in SA, Ivan covered border news in the Rio Grande Valley.