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How to Build Your Credit: Interview with Nate Kirk


By: Nate Kirk, Vice President and Consumer Loan Manager

How to Build Your Credit: Interview with Nate Kirk

One of the most common questions Nate Kirk, Vice President and Consumer Loan Manager at First Federal Bank, hears is: How can I build my credit? “Before I answer that question though, I want to talk about the importance of having good credit,” Kirk said.

Generally, credit can be defined as the ability to borrow money from a lender and pay it back over a set time frame. If someone has good credit, they earn rewards like qualifying for the best interest rates and credit card deals. Good credit can also help reduce an individual’s insurance premiums, improving their chance of renting a home, and may even allow them to avoid a utility deposit.

A lower credit score can lead to higher interest rates and decreases the chance of qualifying for premium deals. Take this into consideration: Typically, one point of interest equals an additional $20 in a traditional auto loan payment. So, the long-term effect for a person with worse credit is they will pay more for a loan than an individual who has good credit.

What can someone do to build good credit? The best advice is to start small and start local. A person should establish a quality relationship with their local financial institution and maintain appropriate balances in their accounts. They should work toward saving enough to be able to apply for a small savings-secured loan or credit card. Since their savings account backs these loans, there is less risk to the financial institution, which lowers interest charges and helps them build credit.

After beginning at a small, introductory level, they can work toward higher dollar loans as their credit score grows, such as an auto loan. If an individual is looking to purchase their first vehicle that includes a loan, it is always a good idea to use some of their savings to make a down payment. This can help keep the monthly loan payment low and manageable. Keep in mind that it is human nature to want the nicest sports car or coolest looking truck on the road. However, people need to live within their means and avoid the temptation to overextend their budget, a situation that can negatively impact their credit.

After achieving good credit, how does someone maintain it? The three best ways to maintain a high credit score are to make all payments on time, keep credit card balances below 30% of the limit, and limit applying for new accounts or credit cards. Following these tips can help someone with future credit applications, ensuring the process is simple and they qualify for the best terms and offers.

Auto loans and credit cards usually serve as the introduction to the credit world. Someone who utilizes a balanced mix of credit products, including installment loans, revolving lines of credit and real estate transactions, will see their credit score increase even faster. Individuals should talk to their local financial institution to learn more about these advanced loan options to see if they might be a fit for them. Most importantly, people need to find a knowledgeable, attentive and caring financial professional who will serve as a guide to the credit environment.

Nate Kirk, Vice President and Consumer Loan Manager