by Charlotte Wood
(last updated August 18, 2017)
In today's world it's hard to be successful in any fiscal endeavor if you have bad or even just mediocre credit. You need to build yourself some good credit and do it while you're young instead of waiting until you're older when most likely instead of having to build good credit you'll have to first work on repairing bad credit. With a credit report anyone can see or notice important things about a person. Are they responsible? Can they handle money well? Can we trust them to handle our money and will they pay us back? Different factors play into building good credit, but fortunately it's not hard to establish early on in your life.
One the easiest ways to start building your credit without even taking out a loan or a credit card is simply opening up an account or two at your bank. While simple bank accounts are low key credit-affecting items, if you overdraw on your account or have a chronic problem with your bank, you bank will report you and that can and will affect your credit. Before you go to work on building up good credit, check your credit and make sure every looks like it's supposed to (e.g. no activity where there shouldn't be any).
Probably the most important factor of your credit score—the one can either make or break you—is whether or not you pay your bills on time. If you don't, then that puts your credit score in jeopardy. Not paying your bills on time is the way credit scores are destroyed and financial lives decimated.
Along with this paramount factor comes a whole slue of other financial priorities. If you need to pay your bills on time then you need to budget your money well and not spend more than you have. If you spend more than you have, then that's another serious issue that needs to be resolved immediately. Probably the biggest and most helpful tip in building good credit is only spend the money you have; if you don't have any extra after the mortgage and utilities go through, then you don't have any money to spend so don't.
While this method should be approached with caution, applying for a low key credit card early on in life is another good way to build credit. If you choose to go this route, apply for one that has the fewest strings attached and one that you can afford to pay. The same rule applies to the credit card option as to any other credit-building endeavor: don't ever spend more than you have. Only buy with your credit that which you know you can pay. Having a credit card is a financial precipice: one way and you're on good credit ground and the other, you're in a fathoms deep debt hole. Be careful.
Credit scores are also built up if you have a variety of credit-building ventures like low-key loans that you can pay back easily (e.g. reasonable car loan). I want to be careful in saying these things because if you can avoid getting yourself into any kind of debt you should by all means avoid it. Building good credit is a good project for your financial well being, but you shouldn't put yourself in too much risk of a bad debt situation.
The best way to build credit, apart from all the other ways mentioned is to start off on a good foot. If you do that and can keep yourself in good standing from the start, you shouldn't have any problems building a most excellent credit score.
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