Building credit is not an overnight task since it builds slowly and over time. Obtaining a loan, mortgage, or lease requires you to have a good credit score which highlights that you have behaved financially responsibly in the past. Good credit reduces risk because it tells lenders you are likely to make your payments on time. Students and young individuals who are going to start building a solid credit history must make smart decisions to ensure a safe future. Doing things properly from the start has its advantages, and maintaining a good credit score is no exception.
Get Help from Others
Anyone in your network, circle of friends, or family who has a good credit history can advise you and help you start the credit journey. Opening a loan account with a cosigner with a good credit history is a great way to kick-start the process. The cosigner simply guarantees to make the payment in case you are unable to make it and should be someone who trusts you. The credit score of a cosigner can suffer if you are unable to pay, so, before using this option, all terms must be considered to protect both parties.
Obtain a Starter Credit Card
A starter credit card is specifically built for people who are starting their financial journey and usually have lower credit limits of $300 – $500. However, the interest rates are significantly higher compared to mature credit cards. Student credit cards allow you to build up your credit gradually and upgrade your cards when you have built credit. People with a little bit of credit history can opt for Capital One credit cards with a high approval rate, among starters. These cards come with no annual fees and offer better rewards if you keep a good history of building credit. Be careful to know the interest rate and the repayment terms for the card before applying for and using it. Not recognizing and adhering to these terms can damage the credit you are trying to build.
Watch Credit Card Balances
Another significant factor in measuring the worthiness of your credit score is how much revolving credit you have versus how much you are actively using. The percentage should be low for a better credit rating, where the optimum percentage is 30% or below. Paying off your balances and keeping them low will ensure that this percentage stays small. Consolidating your credit card balances with a loan can also help you score valuable credit points. Building credit with credit card issuers that accept multiple payments throughout the month should be your priority.
Leave Old Debts on the Credit Report
There is a general perception that having debt on your credit report is a bad sign and that you should hurry to remove it as soon as you pay off the loan. While it is true that negative items affect your credit score and generally stay on your report for almost seven years, removing them might not be the best idea. If you have paid off the debt, you have converted it into good debt, which builds a credit score. Keeping your old accounts open that you have a history of paying on time is recommended by credit building experts. Therefore, avoid closing accounts that have been paid off on time.
Pay Bills on Time
If you are trying to make a large purchase like a house or car, you must plan for it in advance to avoid failing to pay bills scrambling for money. A good credit score requires you to invest time by maintaining a steady flow of payments, month after month. Ruining all your effort and diligence by missing a single payment is never recommended because it will take years to build that again. Building credit requires patience and implementing smart strategies to keep your financial and bookkeeping needs in order.About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.