Building your credit can seem like a long and intimidating process, but it doesn’t have to be.
Even if you’ve hit a few bumps along the way, you can still turn that score around. It is a common myth that bad credit will haunt you for life.
While missteps might remain in your record, once they are paid off you are cleared to move forward.
Here are a few sneaky, but popular, tips for building your credit:
Eliminate small balances first
It is not uncommon for people to have more than one credit card. Many people use multiple cards because they feel by putting a little bit here and a little bit there, instead of having all purchases on one card, it will help them keep their balances low. Well, this isn’t so. In fact, having too many open credit cards can not only become difficult to keep up with, but is sure to cause confusion in the long run. Do yourself a favor and eliminate all of those little balances, as recommended by Bankrate. And then, once they are paid off, stick to one card. This will help you keep organized and in charge of your credit.
You can own or lease many different cars, even while you’re building your credit.
Pay bills on time (a given)
Though this may sound like an obvious tip, you’d be surprised how many people assume they can skip a payment if they make a big one later. Wrong! The important thing to note here is to stay consistent. So you aren’t able to pay the entire card off in one payment – that’s fine. Steady payments, even of small amounts, show the bank you’re steadily working toward your credit, which will benefit your score dramatically.
Get a co-signer
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If you are just starting to build your credit, a co-signer is hugely advantageous because it allows someone with established credit to back you. Now this doesn’t mean you are in the clear. The responsibility is still on you to make your payments and be smart about how you spend your money, because if not the co-signer’s credit score is going to suffer along with yours. But, it provides a nice vote of confidence when getting off your feet and running into the credit world.
Open a secured credit card
Credit cards are typically unsecured, which means you don’t necessarily have the money in an account as you are making a purchase. And when stated that way, it almost sounds too good to be true, which can be the problem. Spending more money than you have is an easy way to kiss your credit score goodbye.
Remember the bank has entrusted you with the money and has expectations you will pay them back. Don’t disappoint them! Instead, get a secured credit card, which is one that is tied to your checking account.
If you have $100 in your checking, then that is the limit of your credit card. This is beneficial because it builds your score like an unsecured credit card will. You are still using credit, and since you can only use the money you already have, you should have no problem keeping it contained and paying it off each month.
Don’t overuse your cards
Just because you are trying to build good credit doesn’t mean you should use your credit card for all your purchases. Don’t go overboard. Use your credit card for significant purchases, but ones that you know you can pay off. Don’t buy your everyday items, such as coffee or lunch, on your credit card. This is how your credit gets away from you, and before you know it, you aren’t making your monthly payments.
The biggest thing to do is approach credit confidently. Be smart, consider your costs and build your credit score.
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