Money & Career
10 Tips for Young People to Establish Good Credit
1/31/2018 5:16:45 PM
Credit

As a young person, you’ve probably wondered how to best protect and build your credit. It seems that everything these days requires you have a good credit rating. From rental applications to buying a cell phone, your credit score comes up with some frequency.

Stepping into the world of loans, credit cards, and payments can be daunting. Follow these tips to help you establish your credit, build it, and avoid damaging it!

Make Your Payments on Time
The best thing you can do for your credit? Make all of your payments on time – even those that aren’t on a credit card. While many of your monthly bills may not factor into your credit score, any bill can impact your score if the bill is delinquent and sent to a collections agency.

Only Borrow What You Can Repay
This sets a precedent of being a responsible borrower, and prevents you from ending up over your head in debt. This goes for running up credit card bills and taking out loans – be sure you can make the payments before you incur the debt.

Pay Your Credit Card Balance
Sometimes, you may need to make the minimum monthly payment. While that is acceptable if necessary, it’s much better to pay off the full balance each month. If you only borrow what you can repay, you should be able to do this with no problem.

Consider Small-Installment Loans
Many home goods stores will let you buy something interest-free with a down payment – things like mattresses, televisions, and other appliances. Take advantage of these deals, make regular payments, and build up your credit.

Get a Secured Credit Card
This is a great way for you to start out. Even eighteen-year-olds can consider these an option with their summer job income. A secured credit card requires a deposit, which becomes your line of credit – you essentially borrow against your own money. However, unlike a debit card, making payments on it does impact your credit. Once you reach a solid credit level, you can apply for a regular, unsecured credit card.

Become an Authorized User
This is especially good for young people whose parents or guardians have solid, established credit. Ask your parents to add you as an authorized user on their account so that you can benefit from the age and stability of their account while you build your own credit.

Aim for Lower Credit Utilization
Your credit utilization is the percentage of your total maximum line of credit that you use. Aim to use 30% or less for the best credit improvement. Maxing out your cards is unwise and can be difficult to repay on time.

Apply for Store Credit Cards
Especially if you’re starting out, store credit cards are a great way to build credit without going through the process of applying for a major card. Various retailers have store credit cards, as do some gas stations and grocery stores.

Keep Old Accounts Open
The longer your credit history, the more financially stable you appear. Leave accounts open and let them age as long as possible.

Limit Your New Account Creation
This goes hand-in-hand with the tip above. Opening too many new accounts lowers the average age of your credit lines and can impact your credit score.

Maintaining and building good credit is key to financial success and achieving your goals. Start now with some simple, easy-to-implement habits and you’ll see the payoff in the future.
Posted by: Keaghan P. Wier | Submit comment | Tell a friend

Categories: Finances

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