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Using a Credit Card for Establishing New Credit

Miramar, FL - October 6, 2009 -

*What is Credit?

Credit is deferred payment on money that you borrow from a financial institution that you can use to purchase goods. You then repay the funds back based upon an agreed set of terms and time frame. Services such as cable and telephone or internet can also be paid for on credit. For example, if you use telephone or cable services for a month then pay for them at the end of that period, you are receiving services on credit. Other common types of credit include mortgages or home loans, as well as personal loans or lines of credit.

Establishing New Credit?

While this task may initially seem daunting, there are successful methods of establishing or rebuilding credit. Start with putting utilities in your name. While it will not establish a credit score it will be helpful in showing a history to future creditors. Start a relationship with a financial institution. One of the first things you should do is open a checking and savings account. Keep your accounts in good standing, as this will improve your chances of obtaining a loan or credit card for establishing new credit with the bank. Department store credit is usually an easier avenue for establishing credit. But be warned...you only need this to establish credit. Purchase one item a month with the commitment to pay it off so that you can move on with establishing credit. Don't fall prey to over extending yourself with any revolving credit.

*Credit scores and how they are used

Simply put, a credit score is a number that lenders use to determine whether you are a qualified candidate for a loan. There are several agencies that lenders will use to obtain your credit score. They are TransUnion, Equifax and Experian. Lenders generally will decide which they will use to obtain this information and will often use more than one of these companies. These three companies use a formula known as FICO. A FICO number ranges from 300 to 900.
Scores closest to 300 are considered high risk, while scores closer to 900 are more favorable amongst lenders. Other variables that are important to your credit score are your payment history, total amounts owed, types of credit in use (revolving vs. secured), length of credit history and any recent lines of credit opened. 
 

*Tips for keeping your credit solid.
 
Make sure you pay your bills on time. Making late payments will a have a role in driving your score down. If you have bills that are outstanding, get them current as quickly as possible. Then be sure to maintain a discipline of paying your debts on time. Another tip for fortifying your credit score is to keep your overall debt low. Pay off debt rather than moving it from one place to another, as this lowers your score and rebuilds your credit.

Be wise with your newly established credit. Avoid having too many inquiries in a short period of time. Limit the number of credit cards and accounts that you have open. Too many open accounts are usually red flags for lenders. You currently live in a time where identity theft is pervasive, so be sure to take the proper precautions. It is imperative that you check your credit score at least once year.  It's free to check it annually, so there is no excuse to not do it. 

About TFCU:
Tropical Financial Credit Union has been offering quality products for customers for over 73 years. This fully accredited Florida credit union is open for all residents of Dade, Broward and Palm Beach counties in South Florida, regardless of where they work. They continually expand and offer free checking, the best current interest rates on used car loans, mortgage rates and other deposits and loan products. As always, they continue to offer free individual and business checking in Florida throughout their branches and for all their members. For more information please visit www.tropicalfcu.org.