Building Credit for Beginners
Building credit from nothing can be perplexing. It takes credit to get credit. But who will issue you credit without any credit history? If you’re lost trying to figure out where to start building credit, we’re here to help. Below are the best options for building credit for the first time:
Become an authorized user
One option to start building credit is to become an authorized user on someone else’s account. Do you know someone with a good credit history? Start by asking them to add you to their accounts. When they responsibly maintain their accounts, you’ll also get the credit, only by having your name on the account.
Apply for a secured credit card
If lack of credit is keeping you from being approved for traditional credit cards, consider a secured credit card. A secured credit card differs from a traditional credit card only because it requires an initial deposit. This deposit amount acts as your credit limit. A secured card is an excellent option for people without a credit history because it’s deposit amount credit limit comes without the risk of spending more than you can afford to repay.
Upgrade to a traditional credit card
After a period of responsible use (usually six months to a year) a secured card will be upgraded to a traditional credit card. At this point, your security deposit on the secured card is returned, and your credit limit is usually upgraded.
Repay your full balance each month
Paying the full balance on your credit card each month is an essential habit for people with beginner credit. As well as building good habits, paying the full balance each month will keep you from being charged interest.
Always pay your bills on time
This doesn’t only apply to your credit card bills. Paying all of your bills on time is incredibly important. This includes phone, utilities, rent, doctors, and any other bill. Not all of your bills will directly tie into your credit but if you don’t pay any of these bills, the lack of payment can be reported on your credit report and worse, the debt could be sold to a collections agency, further damaging your credit for seven years.
Building credit takes but if you remain focused, financially responsible, and give the process time, you’ll find yourself with impressive credit score.