Building credit is difficult. Really difficult! But there are some things that can be done in order to build credit to do most anything you want to do. I am going to break this blog into two sections: establishing credit and rebuilding credit.
If you are just starting out and establishing your credit, there are a few things you really need to do.
Shop around for the best credit card
Use the card for necessities and pay it off at the end of the month
If you have to spend more than you want, always pay more than the minimum payment.
Never go over 30% of your income per month.
Keep the cards open and in good standing to build credit.
Obtain your FREE yearly credit report and pay close attention to it.
Get a small loan and pay it off every month. If you can afford to, pay it off early.
Use secure credit cards if you cannot get a regular card.
PAY your bills ON TIME
These are just a few little ways to establish your credit. If you open ONE card per year until you are happy with the amount of cards you have, that will be the best way to continue to grow your credit. Do NOT open a bunch of cards all at one time, that will hurt your credit and not help it at all!
Ok, I said the word “secure credit card” so what does that mean? That is a card that you will put a specific amount of money on and then that is the amount of money you have to spend. Then you continue to pay that back so you constantly have a specific amount on that card. For instance: You get a secure card requiring $200. You pay that amount and then you have $200 to spend. If you only spend $50, then on the due date, you have to pay $50. It is that easy! It builds and establishes your credit and in about 6 months or so, you should be able to get a regular credit card.
The next thing I want to talk about is student loans. If you are paying on student loans, they will help your credit out. I will say though, if you pay more than the recommended amount, your credit will grow faster. A LOT faster than if you are just going to pay the minimum monthly payment.
Most people are thinking that paying cash for everything is the way to go, but I am going to say… if you pay for everything with cash, you will NOT have any credit! No credit is bad credit sometimes!
Now on to re-establishing Credit
You will try to do the same as above plus more. Once you have had issues with your credit, whether it be from medical bills or having to use credit cards to keep you afloat, making positive changes in your credit is vital. Here are a few tips to get you started:
If you are having problems paying your credit card, call the issuer. Talk to them. They may work with you and make a plan to reduce the debt.
View your new thought of credit as an investment. Use your cards wisely. You are making a plan to possibly purchase a car, home, or rent somewhere.
Don’t go over the maximum. This will give you over draft fees that are high and unnecessary.
Don’t apply for anymore cards! The ones you have are already enough. Re-establishing credit is hard, but it takes time.
Whether you are just starting out, or starting over with credit, you will need to be patient. Credit does not go up overnight. It takes months and months to get to a good score. You need to make a plan to purchase, whether it be a car or a house… it takes years sometimes. Credit is something that everyone needs but most people don’t know much about.
