HOW TO ESTABLISH CREDIT
Start your financial journey by applying for a credit card to start building credit. When I was 18, I got denied a few times and finally Capital One said, yea sure why not, and gave me a credit card with a balance of $300.00 I was stoked! So, don’t get discouraged at first, someone will qualify you. They start you low because they want to be sure you can handle it.
Your local Credit Union may be easier for someone with little to no credit to get approved.
KEEP YOUR DEBT BALANCE LOW!!!
It’s very important to keep your debt balance low and advisable to pay your balance off in FULL each month. DON’T miss a payment, it will heavily impact your credit score—it can set you back 50-100 points, depending how late you are.
But like every wound, time can heal it. If you’re 30 days late, don’t panic, that’s not as severe as being several months past due. But still going to take time to pay off your balance.
You can also establish credit by a student loan, car loan, even a mortgage.
MAINTAINING GOOD CREDIT
If you build something, do you forget about it and walk away? No, so don’t do it with your credit. Stay on top of it, it’s a vert important thing. Here are a few tips on how to maintain good credit:
• Pay your bill on time (obviously) You can set automatic payments online, its easy and super convenient especially if you’re a forgetful, or busy person…or both. If you do this, you can’t overspend and continue using the credit card but that means your balance will increase and so will your minimum payment. I recommend setting automatic payments to credit cards you no longer use and are working to pay them off.
• Keep your debt balance to no more than 30% of your available credit limit This is SO important to keep in mind, as this ratio is the second greatest factor in determining your credit score. If the sum of all your credit card limits is $10,000, aim to keep your total balance to $3,000 or less at all times, no exceptions. Maxing your credit cards signal you’re overspending and having financial troubles which will reflect on your credit score. My thinking is, if I can’t afford it without my credit card, then don’t buy it.
QUICK TIPS
• Aim for credit score in the mid 700s and higher
• Be clear on what impacts your score so that you avoid missteps
• Pay your debt off in full and on time
• Keep an eye on your credit card balance