How to Build Your Credit Score in the US| North Loop Official Blog
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North Loop
26 Feb 2020

How to Build Your Credit Score in the US

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Build Credit in USA

Welcome to the US! Now that you’ve moved here, you’ll need to start building your credit score. You can read more about why credit is important, here. Building both your credit score and history are critical to establishing your life in the United States. So, how do you go about building credit as someone who is new to the US?

Ways to build credit and increase your score in USA

There are many ways to build your credit score. In essence, you must start showing to the financial system that you are credit-worthy i.e. that you pay your bills on time and can be trusted to repay a loan.

Secured Cards
One of the easiest ways is to start building your credit score in the US is with a secured credit card. A secured credit card is a credit card that is linked to a deposit you give the bank i.e. if you give a $200 deposit, you will get a $200 credit limit. This credit limit will help you start building your score almost immediately, and within 12 months you’ll see the results.

Read our reviews of the best secured credit cards in the US here.

Report your Rent
One way to build credit that is often overlooked is your rent payments. You can report your rent to the major credit bureaus by using a service (such as RockTheSore) or by asking your landlord if they report rent payments to the credit bureaus. When you start reporting your rent, you can also report the past 2 years of rent to boost your score. If you have a low or new credit score, this can dramatically boost your credit score!
North Loop has partnered with RockTheScore to report your rent, for free (that's over $60 saved).

If you have a loan, it counts towards your credit score. Make sure you pay the loan payments on time, as being overdue or defaulting on a loan can damage your score a lot.
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Avoid mistakes that can harm your credit score

Debt utilization
One of the most important factors in your credit score is your debt utilization - how much debt have you consumed vs. how much debt you’re allowed to access. For example, if you have a credit card with a limit of $5,000 and you use $5,000 - that means you’ve utilized 100% of your limit. To truly increase your credit score, make sure you don’t let your utilization go above 25-30%. This is an extremely important and quick way of boosting your credit score. But remember, your credit utilization isn’t just measured at the end of the month - it's measured consistently. So make sure you’re paying off bills and that your DAILY credit utilization doesn’t ever go past 50% (at the most!).

Paying your bills on time
While this may seem obvious, it's important to note that not paying your bills on time negatively impacts your credit score if the company reports you to a debt collector.

Closing a trade line
It’s important to note that ‘closing a trade line’ i.e. closing a line of credit or debt, is a very important factor that can impact your score negatively. If you have a credit card and ask the bank to close it, this will impact your credit score (one of the things it’ll do is lower your credit limit, which will impact your credit utilization). So be careful when you’re looking at closing a credit card - check that you’re not closing it in the first year (this affects your score negatively).

Hard pulls
One overlooked factor that can impact your score is a ‘hard pull’. A hard pull is made when you apply for certain things and the bank or financial institution checks your credit score. Banks will first do a ‘soft pull’ to see if you are eligible, and then a ‘hard pull’ to make a final decision. Too many hard pulls over a short period of time can negatively impact your score - so don’t apply for too many credit cards, loans etc. over a short period.

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This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended be advice. You must obtain professional advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax, investment or other professional advice from North Loop or its affiliates. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date. All opinions expressed do not reflect the views of North Loop nor are endorsed by North Loop.