For young adults, having a good credit score is the ticket to financial independence. From securing an apartment to buying a car, a good credit score is a must. If you don’t have credit or if your score isn’t all that great, there are a few things you can do to quickly build your credit and increase your opportunities.
Here are 8 ways to quickly build your credit.
Get A Job First
This seems like a no brainer, but you’ll need a job to get credit cards, lease an apartment and do all of the things you want to do. Getting the job is the first step towards building a credit history.
When you want to get a loan, they look at things like your credit and job history. Even if you have good credit but no income you won’t be getting that loan. It doesn’t matter as much where you work or how much you earn, but rather how long you’ve been with that employer.
Get A Secured Credit Card
It could be hard to qualify for a credit card if you have no credit or bad credit. If that’s you, then a secured credit card is the way to go.
A secured credit card works like a regular credit card, but requires a deposit to get it. Usually the deposit is between $300 and $500, but the money put down will give the issuer the security they need to extend you credit. Beyond the deposit, a secured card works just like a regular credit card with monthly bills, minimum payments and everything else.
Once you’ve built up some credit history, you can then successfully apply for a credit card.
Pay The Entire Card Balance Each Month
Paying the entire card balance will help you look more responsible to creditors. It will also help boost your credit score in a relatively short period.
Be sure to use your credit card too, even if you don’t have to. Just make a few small purchases each month and pay it off in full to help build your credit history faster.
Make Your Payments On Time
This seems obvious, but late payments will negatively affect your credit score. Late payments stay on your history for years, so it’s best to get in the habit of paying on time.
If you need to rebuild your credit fast don’t miss a payment or it will immediately impact your score. Those late payments you had last year are hardly hurting your score anymore, but a recent late payment will.
Create Automatic Payments
In order to ensure you make your payments on time, have your bills paid automatically. If you have the funds, yet are not great about remembering to pay your bills, creating automatic payments will ensure that all of your bills are always paid on time every time. You can set the payments up through your bank or through your credit card.
Apply For An Unsecured Credit Card
Now that you’ve taken the steps to have credit, it’s now time to build up your credit and raise your score. After a year of good credit use, you should qualify for an unsecured credit card. If you have a bank that also issues credit cards, look to them first for an unsecured card.
Your first credit card is important and you should get one as early as possible. The longer history you have with a credit card the better your credit history will look. But you don’t want your first card to charge a monthly or yearly fee.
The reason is that if you find a better credit card later with more perks and no fees you’ll want to cancel your first card. Well that action will end up hurting your score. So find a credit card that at the very least has no monthly or yearly fees, even if it has a high interest rate and no rewards.
Limit Your Credit Applications
I know you’re a bit anxious to get credit. But applying for too many credit cards or loans at once is a red flag to creditors. It can look like you’re taking on too much debt at once which will actually lower your credit score rather than improve it. Regardless of whether you use the cards or not, having too many inquiries on your account at around the same time will drop your score.
Ask For A Credit Limit Increase
Once you’ve had your credit card for a while, it’s now time to apply for a credit limit increase. If you have used your card responsibly and have no late payments, your odds are good of getting your limit increased.
Here’s why it’s good to get a credit limit increase, even if you don’t need one. When the issuer increases your limit it creates a larger ratio of available credit to debt. This is called the credit utilization rate. The bigger the ratio is, the higher your credit score will be.