You know you need good credit — everything from qualifying for a mortgage to getting a decent rate on a car loan depends on it. Yet the credit scores strong enough to open financial doors look like a brainiac’s result on a section of the SAT. And yours, well, it may be closer to half a score you’d be willing to state out loud.
Fortunately, wallowing in self-pity over your most recent credit score alert needn’t be your destiny. If you’re serious about building your credit, you may be surprised to learn of a potential teammate: your bank. Even if you have zero credit history, your bank can be your credit-building partner. You just need to know how to tap into the wealth of information, tools, and support it can provide.
1. Make Your Banking Relationship Official
Choosing a financial institution is more important than most people realize. But the bank you entrust with your hard-earned income and personal data is definitely worth the effort of researching. While there’s no Tinder for banking (yet!), shopping around for a bank that fits your needs can boost your credit.
Beyond the standard checking and savings accounts, look for a bank with products to support your credit-building efforts. Seek out banks that offer a secured credit card, which allows customers to build credit with less risk.
These cards look, feel, and function just like a traditional credit card. However, your credit limit is backed with your own cash, which helps you manage your payment obligation. With consistent use, you’ll rack up a solid payment history reportable to the major credit bureaus.
Once you’ve chosen a bank, review the account offerings that you’ll need. Generally, centralizing your primary banking can help you stay organized and make you eligible for the best products. When you maintain a positive relationship with a financial institution, you’ll qualify for attractive offers, rates, and products.
2. Manage Your Expenses and Credit Use Through Your Bank’s App
The adage “What gets measured, gets managed” applies to work and life. And Peter Drucker’s famous quote drives home the necessity of creating and managing a realistic budget. But doing so isn’t always fun, even if you’re a math guru. Budgets take consistent work, and the needs and costs of modern life are constantly changing.
Let go of the tedium of managing your budget manually and use your bank’s dashboard and app to make it easier. Increasingly, the term “budget” is seen as a buzzkill, especially as digital payments and “buy now, pay later” plans crowd out traditional models. If budgets haven’t worked for you, get creative and use your bank’s account alerts to hack the system.
First, set up automatic transfers for long- and short-term savings goals. Then identify a dollar amount for what you can spend without going overboard. You can set a figure for a spending category like grocery stores to stay on top of inflation-sensitive essentials. Or keep it simple with an amount that leaves you in the black before payday.
No matter your style, use debit and credit card alerts to keep you in check and on track. This approach helps you manage cash flow and credit utilization, which is the second-most impactful factor in your credit score. Use your credit card issuer’s secure app to review transactions and credit use before a surprise bill arrives. Strive to maintain a utilization below 30% of your available credit to earn more points toward your score.
3. Take Advantage of Free Tools and Benefits
Many financial institutions offer complimentary services to their customers. Used as a way to attract more business, these free tools and perks can help you improve your credit. Free credit monitoring can keep a close eye on your credit report and prevent life-altering fraud attempts. Regular credit score reports can notify you of negative changes before things get out of hand.
If you receive a credit monitoring alert, log on right away to review it. Sometimes it’s simply a notification that a hard inquiry, which can influence 10% of your score, has fallen off. Other times, it’s an alert that a new account has been opened. If a notification appears to indicate fraudulent activity, report it as soon as possible.
Modern financial institutions often provide fraud protection for the products they issue. Some allow you to “turn off” your credit or debit card’s functionality on your secure account. This can save you from panicking over a misplaced card, giving you time to find it before requesting a replacement. Many banks expedite issuing a new card for customers who’ve lost or misplaced theirs.
If your lost or stolen card has been used, your bank’s fraud team is there to make it right. Some institutions immediately credit you for the stolen amount, while others launch an investigation. Check out the policy at your current bank or the ones you’re considering to determine their approach. Understanding how they handle fraud and its resolution can help you as you make improvements to your credit.
Lean on the Expertise of Your Financial Institution
Most people don’t enter adulthood as financial experts. In reality, financial literacy is declining in America, driven in part by the complexity of financial decisions today. As you work on your credit, aim to partner with a financial institution that understands the intricacies of personal finance. When you choose a high-quality and engaged bank, you’ll benefit from their expertise in financial transactions for years to come.