Joel Mungongo turned to his bank for a loan and was turned away. He later went to Dupaco. What happened next, he said, was amazing.
Trying to build your credit?
Whether you’re looking to establish your credit history or give your score a boost in the right direction, you might be able to learn some credit-building lessons from those competing in Dupaco’s Great Credit Race.
The race to build credit
On a mission to help members build their credit scores for a brighter financial future, Dupaco kicked off its third Great Credit Race on May 1. Twelve participants are racing to boost their credit scores from 0 to as high as possible in six months.
The racers’ first scores trickled in last week. And the initial results delivered a clear front-runner, with Dupaco member Nick establishing an impressive score of 799. His early lead is sizable, with four racers in a tie for second place with scores of 701.
“I felt like I was being responsible with my credit card and had done all of the right things, so it was good to see results come of it,” Nick said.
Each Great Credit Racer received a Dupaco Visa credit card with a $1,000 limit. They also get one-on-one coaching, learning how the proper use of credit can help build and maintain a favorable score. The racer with the highest score at the finish line wins $1,000. The second-place finisher receives $500.
The competition allows both racers and observers to better understand how credit works and how it impacts every stage of life.
Here’s why credit is so important: Your ability to obtain financing and insurance, rent an apartment and even get a job might all depend on your credit score. The higher your score, the better interest rates you’ll qualify for.
How did the front-runner boost his score so quickly?
The race leader’s edge is significant. And Nick’s credit coach, Dupaco’s Katie Fisher, said she’s stunned by how fast he created a solid credit score.
For reference, lenders typically consider a score of 700 and above good, with a score of 800 and above excellent, according to the credit bureau Experian.
What’s his trick? It comes down to how Nick uses his credit card compared to his competitors. Nick pays with his Dupaco Visa once a month, spending about $5 each time. He used his card the first time to buy a pack of gum. That’s it.
“This has been a good experience,” he said. “It’s a good way to not only educate myself on being responsible and building credit, but also an opportunity to earn some money to put toward schooling.”
Fisher coaches two other racers in the competition. Both have charged a little more on their credit cards compared to Nick. But all three have paid their balances in full each month.
“It speaks to the major impact of one credit card and how it is used. Each of them is utilizing it a little differently, and you can most certainly see the direct impact of that,” said Fisher, a mortgage/consumer lending consultant at the Williams Boulevard branch in Cedar Rapids, Iowa. “It solidifies how important it truly is to keep a minimal balance on your credit card.”
Your credit card balance impacts your credit capacity. It’s the amount of credit you’ve used compared to your credit limits.
Credit works in your favor when you keep the capacity in check, using no more than 20% of your available credit—even if you pay off your balance in full each month. Doing so helps show lenders you’re a responsible borrower. And it makes up 30% of your credit score.
What happens next
At the beginning of the race, Fisher talked about the importance of carrying a low credit card balance and paying it off in full, on time, each month.
“We coach everybody who walks through our doors about that,” she said.
Now Fisher plans to challenge her other two racers to use their cards even less. She’d like to see how that impacts their scores as the race continues.
“It’s almost like a science experiment. I was going to try different strategies with each of them once their first scores came out, but now I don’t think I will. Their usage has made a big enough impact,” she said. “And I don’t want to mess with what Nick has going on, because he’s doing so well.”
Fisher said the Great Credit Race has served as an invaluable learning experience for her as well. Witnessing what works—and what doesn’t—helps her guide others wanting to establish and build their credit.
“It’s much more impactful for members when you can tell them a story about how you witnessed three young members build their score,” she said.
Fisher knows the power of a credit card first-hand.
She has long told Dupaco members about the time she applied for a Dupaco Visa credit card, even though she didn’t think she needed one. After activating her card, she put it in a drawer and never used it. About a year later, Fisher was in the market for a house.
“They pulled my credit, and my score had jumped 100 points just from having this card I never used,” she said. “It really helped me. And to now see that happening with these young racers—wow, it wasn’t just a fluke when it happened to me.”