32_Build-Credit

How Do I Begin Building Credit?

Credit – it’s the double-edged sword of modern society. With good credit, you can do a lot in this world. You can borrow money, buy a home, buy a car, and start a business. But, without it, your options can be severely limited. So, how do you build credit? Here are a few tips to help you start down the path toward great credit and a better financial future.

Get a Credit Card

You’ve heard horror stories about credit cards and consumer debt, but did you know a credit card can be a great tool to begin building credit? As long as you’re responsible with your credit card, meaning you don’t max out your credit limit and fail to make monthly payments, your credit card will help you build credit. A good rule of thumb is to treat your credit card as a debit card. In other words, make necessary purchases using your credit card and pay off your balance in full every month. Plus, the right credit card can give you extra perks and rewards, in addition to its credit-building aspects.

Make Payments On Time

Did you know that unpaid bills or rent can have a negative impact on your credit? Unpaid bills usually end up in the hands of a collection agency, and may get reported to a credit bureau. So, whether it’s a cell phone bill, a rental payment, or a utility bill, pay it on time. Plus, paying bills on time establishes good habits that will help down the road when you have a mortgage or other loan in your life. And, it doesn’t hurt to check your credit report annually so that you can resolve any discrepancies or improper reporting.

Take Out a Loan

Like the chicken and the egg, credit and the loan go hand in hand. You can’t have one without the other, but which comes first? If you don’t have enough credit to secure a loan by yourself, consider asking a trusted family member or friend act as a co-signer. Of course, you and your co-signer should understand that in the event you fail to make payments, your co-signer will be on the hook, putting not only your credit but your relationship at risk. On the other hand, everyone needs a credit kick-start somewhere, and a loan is a great way to begin building credit.

Conclusion

Building credit is absolutely necessary in today’s world, and it has benefits (a car, an education, a credit card) separate and apart from the purpose of building credit. Just make sure you’re responsible, as credit has a way of backfiring if you’re not careful about your spending and dedicated to making every payment. Now, get out there and start building your financial future, one credit step at a time.

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