One of the biggest challenges you face after graduation is building your credit history to get a good credit score. Your credit score and history are like your financial resume. They can help you find a job, rent an apartment, lower car insurance premiums, buy a house and more. They can also keep you from doing these things.
You probably know The SaintPL that building up good credit is important, but you may have no idea how to do it. Fortunately, there are simple steps that you can take to get a good credit score.
How to start without having a big credit
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To be approved for credit cards, loans and other types of credit accounts, you must prove that you have the income to make repayments. However, it may be harder to deposit a job in the current market than you might realize. Some employers perform full criminal and creditworthiness checks on future employees, and as a recent graduate who has little or no credit history, this can be an obstacle.
Keep in mind that the credit history that you build up can influence future employment opportunities. If you are looking for a company ladder or want to pursue a career that involves financial responsibilities, a good credit score is practically required to get you there.
Request a secure credit card
Although it can be difficult when you leave the university, obtaining and using credit cards is part of the process of building credit. If you find it difficult to obtain a credit card, you can request a secure credit card. A secured credit card works just like a regular credit card, except that you place a deposit with the credit card company to obtain it.
The deposit ranges from $ 300 to $ 500 depending on the credit card company and current credit status. If you have negative items on your credit, the issuer may ask for a higher down payment to issue the secure credit card. If you do not have any negative items on your credit, but simply do not have much of a credit history, the credit card issuer may request a lower down payment amount.
A secure credit card is not a bank card and is not linked to your bank account. You receive a monthly invoice and you are obliged to make at least the minimum payment on the card. The payments are not deducted from the deposit you make with the issuer. Instead, the deposit is paid in case you do not make your payments by default.
The purpose of establishing a secure credit card is for the card issuer to report the bill to the credit bureaus. If you use the card and always make your payments on time, you can build a positive credit history with which you can set up new and additional types of credit in the future.
Always pay your entire balance
Responsible use of a credit card or credit account is another factor that helps to calculate your credit score. The best action to take is to pay your credit card balance in full each month. The publisher only requires that you make a minimum monthly payment; However, if you only pay the minimum, you keep a balance and you create interest costs. Over time, carrying a credit card balance can damage your credit score. If you have to carry a balance (due to an emergency or other unforeseen expense), keep it as short as possible.
Always make payments on time
According to FICO, 35% of your credit score calculation consists of your payment history. This means that you must always pay your invoices on or before the due date and never miss a payment.
Not only do late payments negatively indicate your creditworthiness, they can also create negative markers that cancel out any steps you have taken to build a positive credit history. To ensure that you always pay on time, you expire dates in your calendar, have your creditors send an invoice due to warnings or, even better, automate your payments.
Automate your payments
A great way to create a trouble-free payment plan is to set up automatic invoice payments. There are generally two ways to do this: you can allow the debtor to automatically deduct the payment from your checking or savings account, or you can set up automatic payments at your bank that releases the payment upon receipt of a electronic invoice notification.
If you prefer not to link your bank account to your debtor accounts, you can consider setting up automatic payments via a credit card. As long as you can pay your credit card bill in full each month, you can build up your creditworthiness by not only paying your monthly bills on time, but also by showing responsible use of your credit card.
Keep in mind that you always have to check your invoice payments. Check your bank statements or credit card statements every month to make sure they are accurate.
Request an unsecured credit card
After a year of using a secured credit card, you can request an unsecured credit card. If you have used your credit card wisely at this point and have paid all your invoices on time, you have had the opportunity to build a positive credit history.
If you use a bank that issues credit cards, your existing banking relationship can help you get approval. However, it is important to look around and compare cards until you find one that suits you best. Consider interest rates, credit card reward programs and possible credit limits. When you choose a card that you think best meets your needs and wishes, complete the application and submit it.
If you receive an unsecured credit card, stay disciplined in your use. Only charge what you can afford each month, and always pay on or before the due date.
Avoid too many new credit accounts and apply for loans
While applying for new credit accounts and loans is important to build a solid credit, it is also important to spread out over the preparation of these accounts over time, rather than taking it out at once.
For example, if you receive an unsecured credit card, use it for about six months before applying for another credit card, a car loan, a credit account for furniture stores, or another type of account. This is important because every time a lender draws your credit, your score gets lower. The only exception to this rule is if you apply for the same type of loan from multiple sources. For example, if you are financing the purchase of a new car, you can shop and compare the interest rate and loan type with three or more different lenders. If you apply for these loans within a timeframe of approximately 30 days, all credit applications will only count as one.
Increase your credit limit
Instead of requesting a new credit card to increase your credit limit, simply request a credit limit increase with the cards you already have. After the publisher has reviewed your account, it will assess whether you are eligible. 30% of your credit score is based on the percentage of your available balance that you use. So if your credit limit is high and your use of the line is low, this can help to increase your credit score. In other words, it’s a good idea to request a credit limit increase long before you actually have to use it.