If you want to take advantage of many financial chances in life, you must start with strong credit. Building a strong credit score takes patience. It does, however, open the way for a variety of benefits, such as low-interest rates on car loans, credit cards, and other mortgages. In numerous cases, employers and landlords have been observed reviewing the candidate’s credit reports before even giving a job or granting a residential application.
Where to begin and what measures to take to develop credit as a beginner
To start building credit, you need to get credit. However, getting credit for the first time could be challenging, but it is not impossible. Here are steps for a starter to follow in order to build up his credit.
With a credit card:
Apply for a secured credit card that requires a certain amount of security deposit against the credit limit extended to you on approval. This amount gets refunded or adjusted later.
Get a retail store credit card which offers low credit limits but can be approved easily.
Request someone to make you an additional or authorized user. However, before doing so, make sure the primary cardholder is in good standing himself and has a good credit score.
You can get a cosigner, with good credit, for a loan or credit card. This would improve your possibilities of getting approved.
Always make your payments on time. Payment history plays a pivotal role in building up your credit score in the long run.
Opt for just one credit card to start with.
Act responsibly and borrow an amount that you can comfortably and affordably repay each month.
Try to pay your balances in full every month. In other words, always pay more than the minimum on credit cards.
Without a credit card:
Alternatively, good credit can be built without a credit card too. You can do so by:
Borrowing out a loan and repaying on time
The loan could be in the form of a mortgage, a car loan, student loan, or personal loan.
You can ask your parents for a hand by making you an authorized user on their rewards credit card or by co-signing for you when you apply for your first car loan or student loan.
Building credit responsibly:
Follow these thumb rules when beginning your credit journey
Avoid paying interest charges on your credit by paying off the entire amount every month
Make your payments on time, even if it is just the minimum amount that you can afford to pay. Late payments can wreck your credit reports for years.
Restrict your credit utilization rate to 30% of the assigned total credit limit to you. This would improve the overall health of your credit in the long run.
