It is not true that good credit can only be achieved when you’re older and more experienced with money. You can start building good credit even when you’re young and just starting to get introduced to the financial world. With the steps illustrated below, this is very much possible.
1. Only borrow when needed and only borrow what you can afford.
Experts advise that one of the best ways to avoid incurring debt is to only borrow when you need it. While this is true, there is still a problem with this statement as you also have to make sure that you can afford it. Otherwise, do not borrow at all if you wish to avoid further financial troubles. Cultivating this principle in you will ultimately show in your credit score.
One good technique in relation to this is to review your budget first before taking out a loan. This is to make sure that you can afford the monthly installment.
2. Don’t max out your credit card.
While non-stop shopping may be tempting, it can also be very unhealthy for your financial future. Creditors know that those who max out on their credit cards will have a difficult time in paying back the amount due. This could result in bad credit.
In order to build good credit, only use about 30%-50% of your maximum credit limit.
3. Start with only one card that is paid in full monthly.
You are young and your finances are still building. To support the growth, don’t get too excited with plastics. Start with only one card until you’re ready for additional accounts. Also, don’t forget to pay your credit card balance in full every month. To make this possible, refer back to number 2.
4. Allow your account to age.
The wisest financial experts would tell you to leave your oldest accounts open, and they have a good reason why. Your old accounts are the best proofs of your good financial history so they can really help a lot when it comes to building good credit.
5. Pay on time.
There are short-term and long-term benefits of paying on time. First, it saves you from possible late charges and other fees on top of the current cost of the loan or bill. Second, it adds points to your credit score. In short, paying on time helps you avoid a bad credit rating.
The habit of having good credit starts when you’re young. Make sure you develop the habit to avoid financial troubles later on in life.