It is never too early, or too late, to build good credit. Think of it like building a house — you want to start with a good foundation. Then set small, achievable goals to create a solid design and structure to continue developing. Taking steps to improve your credit can help you reach new, larger goals — like owning a real home.
What is credit?
Credit is part of your financial power. It helps you get things you need now, like a loan for a car or a credit card, based on your commitment to pay later. To start building credit, you might open and use credit cards in moderation. Just be sure you can pay in full, on time, and consistently. This can help you establish a credit history and strengthen your score.
The amount of credit you use compared to how much credit you have available is called your credit utilization. When you take your total balance across all credit cards and divide it by your total available card limits, this is your credit utilization ratio1. To build and keep a strong credit score, aim for a utilization rate of less than 30%. If you’re curious about your current score, you can access it for free once a year from each of the three primary credit reporting agencies: Equifax, Experian, and TransUnion.
Why it’s important
A strong credit history can help you toward a goal of homeownership. And this is especially important because the median credit scores of Black mortgage applicants are lower than those of white applicants. So, you want to be in the best possible position when you apply for a mortgage.
If you’re a first-time homebuyer or want to learn how your credit score relates to financing options, check out Fannie Mae’s free homebuyer course, HomeView™. This complete guide — available in English and Spanish — can help you learn how to save and prepare for your home purchase, work with lenders and real estate professionals, understand the mortgage process, and so much more. It’s a great tool to get you started on this new journey.
Learn more about how you can build credit and how it can help you work toward a goal of homeownership.
1 Consumer Financial Protection Bureau