A Beginner?s Guide to Credit
03/11/2026
A Beginner’s Guide to Credit
Credit can feel confusing at first, so think of credit as your financial reputation. Lenders use your credit history to determine how likely you are to repay borrowed money. Whether you apply for a credit card, auto loan, or mortgage, understanding credit is essential.
What is a Credit Score?
Your credit score is a three-digit number that reflects how you manage debt. It’s calculated on several factors:
- Payment history (do you pay on time?)
- Amounts owed (debt-to-income ratio)
- Length of credit history
- Types of credit used (loans, credit cards, et cetera)
- Recent credit inquiries (closing a credit card, applying for a mortgage, et cetera)
Higher scores generally mean better borrowing options and can mean lower interest rates.
How to Start Building Credit
If you’re just starting your financial journey or looking to improve your score, it is important that you start small and stay consistent. First, you should open a starter credit card. Then you should make small purchases and pay your full balance on time every month. Payment history is the most important factor in your credit score. Even one late payment can have an impact.
Keep Your Credit Healthy
- Keep balances low (ideally under 30% of your limit).
- Avoid opening too many accounts at once.
- Review your credit report annually for errors.
Reminder: You are entitled to one free credit report every year via AnnualCreditReport.com!
We understand that everyone starts somewhere. That is why our team is here to answer questions, explain your options, and help you build credit responsibly. Good credit is built with informed decisions. If you would like to speak to one of our team members, give us a call at 1-800-582-2265 during normal business hours.
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