When you are just starting out, it can be hard to buildcredit. So where should you start if youdon’t have anything reporting on you yet?Here are some tips for millennials to build their credit when startingfrom ground zero.
This post is sponsored by CreditRepair.com. All opinions are mine alone and are honestlyconveyed.
Apply for a creditcard
One of the easiest ways to build credit is to apply for acredit card. Credit cards report to thecredit bureaus each month that you have a balance and make a payment. So once you get a credit card, you will startbuilding a credit history pretty quickly.You won’t necessarily see a big movement in score right awaythough. It takes time for the bureaus tosee how you are going to handle the new credit that has been extended toyou. So during this time, it is veryimportant to make on time payments.
If you have a part-time job, it may be relatively easy toapply for and obtain your own credit card.Creditors want to know that you have the means to pay back the moneythat they are willing to lend to you.However, if you are a full-time student, you may need a co-signer to getstarted. So if you have a parent orresponsible co-signer, they may need to help you in obtaining the initialcredit card.
Get a secured creditcard
If you can’t qualify for a credit card on your own and don’thave a responsible co-signer, then your next option may be to get a securedcredit card. What is a secured creditcard? It functions just like a creditcard when you use it, however, it is different because you aren’t truly using credit—it’s really more of a debit card. With this type of card, you will have to makea small deposit before you are able to use the card, guaranteeing that you havethe funds available to pay for your current charges.
Use small amounts ofcredit regularly
Once you get a credit card, it is important to use it regularly. This may sound kind of weird to tell you touse credit, however, this is exactly how you build a credit history—to havecreditors reporting to the bureaus on you each and every month. The key to using your credit cards, though,is to know how to use them. Opening acouple of credit cards is even a good idea.You don’t want to open too many in a short period of time though,because that will have an adverse effect on building a positive score. You can carry a small balance or simply payoff the credit card each month, but using it every month will help to buildyour credit.
Make payments on time
It is important to make on-time payments any time, butespecially when you are building credit.Your most recent payments are always those that weigh most heavily intoyour credit score, in particular the last two years. This time period is what lenders often lookat to help determine credit rating and programs for which you qualify. There truly is no short-cut for building asolid payment history. However, as longor as short as your credit history may be, keep making those payments on timeto contribute to the highest score possible.
Keep a low balance
Make sure to keep those credit card balances low. It is much better to have two or three creditcards with small balances (less than 50 percent balance to limit ratio) than tohave one credit card that is maxed out.Showing that you are able to handle credit in a controlled manner andmaintain a large amount of open credit (credit that has been extended to you,but you have not used), will increase your score.
Ask your landlord to report your payment history If you arerenting, chances are, your rental payment history will not show up on yourcredit report. However, if you aremaking your payments on time, you may want to ask your landlord to report yourhistory of payments, which can help to build a good credit history. The converse is true though too. If your rental payment history is less thanperfect, it will harm your credit. So ifyou ask your landlord to report to the bureaus, make sure to diligently payyour rent on time.
Become aco-signer—with caution
Whenever you are a co-signer with someone else, the accountis tied to your credit history. Thatmeans that if you are do-signer on an account that either you are the otherparty is paying on-time, it will build credit credit history in a positiveway. However, you must be very carefulabout who you choose to become a co-signer with. Each co-signer on the account is responsibleto make sure the account is being paid—and paid on-time. So if you sign jointly with someone who isn’tresponsible, it could end up hurting your credit.
Keep the accounts youapply for and obtain
Don’t apply for every credit card that comes along. Rather, be selective in the credit cards that you apply for and obtain. For instance, if you know that your shop at a certain store regularly and will use the credit card for years to come, go ahead and apply for it. However, if you are just applying for a credit card to get some sort of short-term deal or discount and don’t plan on keeping it, it could hurt your credit. Why? Part of building a credit history is just that—history. If you don’t keep a credit card or account very long, it can still leave question marks for a potential creditor if not much is showing up on your credit report. And if you are applying for multiple credit cards that come along to get points or deals, you might be authorizing too many credit inquiries or new accounts opened in a short period of time.
