Even if you have no credit history to speak of, you likely have ambitious ambitions for the future. You can be a recent grad or a younger person looking for a brand-new car.
Good news for people who have never had a credit need! Paying for necessities out of pocket eliminates the need to keep track of due dates and interest rates associated with loans, credit cards, and other forms of debt.
However, if you’re young, you almost certainly will require credit at some point. You may want to buy a house someday. You’ll likely need credit because it’s unlikely that you’ll have enough cash on hand to pay for these expensive products directly. In addition, having some credit is always helpful because many utility companies check credit before providing services like energy.
When you’re just getting started and don’t yet have any credit established, you can take the following steps to put yourself up for success:
1. Be prompt with all bill payments, especially your mortgage or rent. The only thing that can damage your credit score as much as late payments is declaring bankruptcy or having tax liens against you.
It’s essential to establish a good credit history from the start. Having open credit card accounts that haven’t been used for a long time can do wonders for your score. If you have a strong aversion to using credit, you may want to consider charging recurring expenses like utilities and a phone bill to a credit card and then hiding the card somewhere out of sight.
3. Don’t charge your credit cards to the limit to have them. Don’t expect to impress any lenders. Instead, they will likely conclude that you have financial management issues. Once you have more than several credit cards, things get intricate.
4. Never apply for excessive amounts of credit in a short time. Your credit score could take a hit if there are a lot of inquiries into your credit reports that you don’t initiate. If you’re looking for low-interest rates, you should assume that any time you provide a lender or credit card company with your Social Security number, they will pull your credit report.
5. Keep a consistent and tidy appearance when filling out credit applications. In this way, your good deeds are less likely to be spread throughout multiple files or, even worse, someone else’s file. Consistency’s essential when using “Jr.” and “Sr.”
6. Check your credit report for mistakes, especially if you plan to soon apply for a time-sensitive loan, such as a mortgage.
Applying for a store credit card (at Sears, JCPenney, etc.) is a significant first step toward establishing credit. Make a few low-priced transactions immediately after receiving the card, then pay off the balance. If you do this often over a year, you will build a solid payment history and develop credit. However, you shouldn’t go crazy and spend more than you can afford.
A secured credit card option is also available. You load funds into the card’s associated account and then use the card to make purchases. Then, spend as much as you choose from your available balance. Credit bureaus treat These cards as traditional credit cards and are seen as an excellent way to build credit.
To build credit, you must first have a bank account. This improves your credibility with financial institutions and demonstrates that you can handle your finances responsibly.
Before applying, you should always find out if a credit card issuer reports your payment history and creditworthiness to any of the major credit bureaus. As we’ve already established, they are not obligated to do this, and if they don’t, it won’t matter if you get one of these cards or loans and always pay on time.
A consumer can establish credit by completing a purchase or applying for a loan with a co-signer. A co-signer is a person with solid credit who agrees to take on some of the responsibility for making sure you pay back the loan on time. A co-signer is typically a close family member, such as a parent. Never forget that they are taking a chance on their credit history to help you, and do your best to avoid disappointing them at all costs.
Having a sizable down payment ready to go is a plus when applying for a loan, such as an auto loan, because it reduces the total amount that must be borrowed. The lending company will see that you can save, so they will be more willing to take a chance on you.
Let’s do a short recap on how to get a solid credit history.
After applying for one, create a few of the charges on a store or gas station credit card.
Cosign a loan with a friend or family member.
Locate a reliable, risk-free credit card company.
Initiate a checking account
You shouldn’t apply for a bunch of credit cards at once.
See whether there are any mistakes on your credit report.
Take it easy and slowly
Do not waste money
Don’t be late with payments!
As could be expected, the final one is crucial in establishing credit. Anything you strive to do will amount to a hill of beans if payments are not made on time. Making all your costs on time shows your creditors and the credit bureaus that you care about your financial situation.
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