TLDR: Basic Banking and Credit for New Americans (Part 3)
In the third part of the series “Basic Banking and Credit for New Americans,” the Department of Financial Protection and Innovation focuses on understanding and building credit in the United States. The article highlights the importance of credit scores and their impact on accessing loans and credit. It provides tips for building good credit, including checking your credit report, paying bills on time, and using alternative identification documents.
- Building a solid credit history is crucial for accessing loans and credit.
- Checking your credit report regularly is essential to monitor your financial standing.
- Paying bills on time showcases responsibility and trustworthiness.
- Alternative identification documents such as ITIN can be used to obtain a credit card.
- Secured credit cards are an excellent option for individuals new to credit.
- Credit-building loans and lending circles can help boost credit scores.
Building Good Credit: What You Need to Know
The article compares building a solid credit history to constructing a sturdy building; both require a strong foundation. It emphasizes the following steps to start building a foundation for good credit:
- Check Your Credit Report: Obtain a copy of your credit report from Equifax, Experian, or TransUnion. Free credit reports can be requested annually and weekly from AnnualCreditReport.com.
- Pay On Time: Paying bills promptly is considered a sign of responsibility and trustworthiness. Consistently paying bills such as cell phone, electric bills, and rent can positively impact your credit score.
Ways to Build Credit
The article suggests several methods to build credit:
- Alternative IDs: Some financial institutions accept alternative identification documents like ITIN to obtain a credit card.
- Secured Credit Cards: For individuals new to credit, secured credit cards are a suitable option. A cash deposit is required, which acts as the credit limit. After successfully managing the account for a few months, individuals can qualify for a regular credit card.
- Credit-Building Loans: Certain apps offer credit-building loans ranging from $300 to $1,000. Monthly payments are made on the loan, and the lender reports these payments to major credit bureaus. Upon completing the repayment term or minimum number of payments, individuals gain access to the funds.
- Lending Circles: Some individuals opt for lending circles to borrow money without interest or fees. Trusted participants contribute a fixed amount to a shared pool, and each member takes a turn receiving a loan from the funds.
Overall, this article provides valuable insights into understanding and building credit for new Americans. It emphasizes the importance of monitoring credit reports, paying bills on time, and utilizing alternative credit-building methods.