If you’re planning on ever buying a car, buying a house, or getting any sort of substantial loan, you need to have a credit score, and more often than not, it needs to be a good one. While building credit might seem like a catch-22 — you need a credit card to build credit but can’t get a credit card unless you have credit — there are ways for anyone at any stage in life to begin to build their credit score. So how do you build a credit score and, more importantly, how do you make sure that yours is good? Check out these tips for building a credit score and keeping it where you want it.
Establish credit. There are several ways you can go about doing so, and some of them don’t involve credit cards. You can apply for a secured credit card which requires an upfront payment as collateral if you miss a payment; you can apply for a credit-building loan, which, as the name says, builds credit for the borrower; you can get a cosigner for a loan or an unsecured credit card; you can become authorized to use someone else’s credit card which can help you build credit without bearing the financial burden alone; or you can look into getting credit for paying your rent through rent-reporting services. Each of these methods come with their own caveats and stipulations, so make sure you’re well-read on the matter before choosing one for yourself.
- Enforce good payment habits. These include paying all of your bills on time, including both credit cards and utility payments. If your bills go unpaid and sold to a collection agency, your credit will be seriously hurt. Consistently paying bills on time — especially credit card bills — is one of the best and easiest ways to improve a bad credit score or build a new one.
- Keep a low credit card debt. The best practice when it comes to credit cards — especially concerning your credit score — is to pay off your balance in full each month. This eliminates additional interest that will accrue with unpaid monthly balances. However, if you are unable to do so, it’s important to never let your debt balance (the amount you owe) exceed 30% of your credit limit (the amount you’re allotted to spend). So, if you have a $1,000 credit limit, keep your debt balance under $300.
- Check out your credit report. Once a year you’re entitled to a free credit report from each of the three major bureaus: Experian, Equifax, and TransUnion. Your credit score will fall somewhere in the range of 350-850, with higher numbers being better. If you’re just beginning to build your credit, it’s important to take a look at your current report and make sure that there are no mistakes and all information is accurate. Mistakes on the report will impact your credit score.
Now is the best time to start building your credit, and if you have children, it’s a good idea to be prepared to help them begin building credit when the time comes. It’s never too late to start building your credit, but it’s never too early, either.