Your credit history is something that will follow you around your whole life. If you haven’t realized it before, your credit history is very important. Without established credit, you’ll never be able to get approved for credit cards, car loans, a home mortgage and it can also determine rates you’ll pay on insurance.
Needless to say, having good credit is important. In this article, we’re going to explain the different ways you can establish your credit, build your credit and start building your credit scores.
Related Reading: What Is Your Credit Score If You Have No Credit?
How To Start Building Good Credit
One of the best ways to build your credit is using your credit responsibly. That means you’re using credit and making your payments on time.
If you don’t have established credit, how do you get started building good credit?
Secured Credit Card
While nobody likes secured credit cards, they give you the opportunity to get some credit established, as long as that secured credit card gets reported to the major credit bureaus.Before you apply to get a secured credit card, make sure it does report as needed.If it doesn’t report to the credit bureaus, it won’t help your credit scores.
Now, what is a secured credit card?Credit card issuers have specific credit cards they give to people that have no credit or bad credit.In order for you to get a secured credit card, you have to deposit money for that credit.
For example, if you want a credit card with a $500 limit, you will need to deposit $500. Whatever amount you deposit, that will end up being the credit limit you have on your credit card. Some of you may not have much money if any to deposit, but this is one way you can start building or rebuilding your credit.
If you have bad credit, you still have a high chance of getting approved for a secured credit card. Even if you have a credit score under 600, even under 500 or less, secured credit cards are going to be the best way for you to build positive credit.
Applying For A Credit Card
For those of you that have no credit at all, it’s possible you can apply for a credit card and get approved without having to deposit money for a secured credit card. Just because you don’t have credit doesn’t mean someone’s not willing to take a chance on you.
You may be noticing credit card offers are coming through the mail or you’re getting phone calls to apply for a credit card. While this can be an exciting time, you have to use your credit responsibly or you’ll end up in trouble.
Don’t let us deter you, if you need a credit card, we’ll be the first one to help you find the exact credit card you need. However, you don’t want to get more credit than you need.
If you’re not receiving anything in the mail, you can sign up for free websites such as Credit Karma and Credit Sesame. With these 2 platforms, you can access both of these for free and they will allow you to see credit card offers you can apply for.
Also, both of these platforms will allow you to monitor your credit also. With a free account, you’ll also get your free VantageScore credit scores. There’s a ton of benefits and perks you get with these accounts, so go sign up.
Authorized User
A credit score cheat if you will is getting your name added to someone’s credit card account as an authorized user. While it’s much easier said than done, it can have an instant impact on your credit score.
If someone with great credit adds you as an authorized user, your credit score can receive an immediate impact, especially if you have bad credit. This is one of the easiest and quickest ways to improve your credit scores.
Of course, if you’re considering adding someone on your credit card, better make sure you trust them. Honestly, you better trust them a lot, they will have legal access to access your account.
If you’re added as an authorized user and that person has great credit, your credit profile will immediately benefit from being added.
Use Your Credit Wisely
Before we end this article, it’s important to note that the key to good credit is using your credit responsibly.
There’s 5 key areas where credit scoring companies focus on. These are;
- Credit History
- Payment History
- Credit Age
- Credit Utilization
- Credit Inquiries
One of the most important of these 5 is credit utilization.
Credit utilization refers to how much credit you’re using. For example, if I have a $1,000 credit limit and I’m using $500 of that credit, my credit utilization ratio is 50 percent.
The general rule of thumb is to keep your credit utilization below 30 percent, some even say lower than that. To find your perfect balance, you need to monitor your credit closely.
The 2 biggest credit scoring companies are FICO and VantageScore. You can sign up to FICO to monitor your FICO scores. For VantageScore, you could sign up to Credit Karma and get free credit scores throughout the month.
If you don’t know what’s on your credit, there could be mistakes, so it’s worth checking.
Monitoring your credit is a wise thing to do when you’re just getting started.
