Young adults find out fast that they need credit to do anything in the adult world. Credit is easy to build once you know where to start. But, no one gave a class on that in school, did they? Here is some advice to get you started.
We all grow up and have a vision of what we expect our lives to be like. We imagine the perfect job, home, car. You possibly want to be an accountant with a three-bedroom home, in California, with a reliable vehicle. All before you turn thirty. Most of the time, you don’t have the money to accomplish these goals outright, even with a secure job. This is why you will need a good credit score that shows people you know how to spend your money so that they can trust you with some of theirs. You need good credit for everything, but you need credit history for that. The best way to start is with a credit card! Get a secured credit card. You can go to any bank and apply. This card is easier to get because you will put some of your own money down to get started. The money you put down will become your credit limit. All you have to do now is use it, pay for goods and services that you would use your debit card for, and stay under that deposit.
Plastic, maybe, but not a toy
You need to start building your credit because you will use your credit score for the rest of your life. Landlords will check it, banks that lend you money will want to know it, and sometimes even your employers. Be careful with that little piece of plastic because it can hurt you as fast as it started to help. You can ruin your credit, but all that can be avoided. Stay away from spending more than you have, don’t apply for more credit cards, and always pay your bill on time. Your score will flourish and, remember, all those dreams depend on it.
Never use your credit card for things you can’t afford
It can be tempting to want to spend it like free money, but you have to pay it back at the end of the month. Try to use it for bills that you already pay every month and save the shopping spree for your savings. This way, you always know what to expect when you get your bill. It will be consistent and easy to keep track of.
Avoid applying for other credit cards, even if it may save you 10% when you are checking out at a department store. It can negatively affect your credit score. This is not a time to be impulsive. Instead, try to get a card with good benefits and use the one. If you find you want to open another account, to separate your finances, go ahead as long as you use both and pay them both off on time.
No matter what you use your card for, how much you are spending, or where you got it, the most important thing to remember is to pay your bill on time. This is why you should spend what you can afford because at the end of each month you get a statement from someone expecting their money back. If you don’t pay them, you will tarnish the reputation you worked so hard to build.
What is my credit score?
Your credit score is a number between 300 and 830 that helps a lender decide on whether to lend you money or sell/rent something to you like a car or house. The higher your number, the better your score. A good score might be 730. This would show a lender that you pay your bills on time, would be a reliable person to lend money to, and would probably qualify you for a lower interest rate. A bad credit score might be in the 550 range. This would be a red flag to any lender; you probably don’t pay your bills on time, you pay your credit cards off with other credit cards and have outstanding balances. This would make someone hesitant to lend you the money you need because you have not paid back the money you already borrowed. If someone did lend you money, they would give you a high-interest rate that would make what you are buying more expensive.
You can check your credit score online or using a free app. Check it regularly and get a summary of the activity that may be making it drop so you can adjust your spending behaviors. Get a secured credit card, pay your bills on time, know your credit score, and you will be in a great position whenever you decide you want to make your next life decision.
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