Building credit, no matter if you’re 18 or 38 can be a daunting task, to say the least. Building credit takes time, patience, and a healthy amount of responsibility. Everything you do, from your first credit card onwards, will affect your credit history. However, this thought shouldn’t stop you from taking a deep dive into the adult world of plastic and balance books. Here’s my simple guide to building credit the right way.
First Things First
There’s a common misconception that you should go for a “common” credit card for your first every line of credit. And that’s where the problems can start. It’s important to do your due diligence. Do the research. If you’re getting a card through your bank, they’ll likely walk you through the entire process, including any reoccurring fees and APR percentages. If you’re feeling confused, you’re not alone. If this is your first time opening up a line of credit, ask every question imaginable. It’s better to know too much than know too little.
Remember that you shouldn’t apply for a card until you actually need, plan to use it, and are ready to talk on the major responsibility of building credit. All this is to say, designate your card for needs. As scary as credit can be, it’s also an exciting time. Almost too exciting. Don’t get carried away by having a line of credit and only use your card for the planned designated categories you’ve set: like groceries or fuel. This brings me to my next point.
You’ve Got Your Card, Don’t Go Overboard
Owning a credit card shouldn’t mean you’re giving yourself permission to overspend. If you can’t afford to buy a material item, a line of credit won’t change that. The best and safest way to build your credit—while building up good spending habits—is to only spend on what you can afford. Do yourself a favor a get comfortable with being a responsible shopper. In the future, important lenders and creditors will see a credit history with visual discipline, and that will come in handy if you ever need to borrow money from the bank or open up another line of credit. Most importantly, only charging your credit card for what you know you can afford lessens the change of falling into major debt.
Know the Perks
Most credit cards while coming with certain types of perks, based on the card and your bank. I personally bank with a banking company that lets me get the most out of every charge on my card. This way I feel double the gratitude. I’m building my credit by only spending on certain items, never overspending, and receiving perks, like cash back, whenever I spend.
Pay in Full
Paying only what you can afford each month on your credit card statement could be hurting your credit score significantly. By paying off your balance in full each month, you’re showing that you’re more than capable of doing so. Paying in full while also help keep you from accumulating debt. Of course—you know what I’m going to say here—if you spend money you don’t have, the likelihood of paying your monthly balance in full is more difficult. Keep to your budget. Pay in full. And built that credit!
- Tip: Not every monthly payment will be listed on your credit report. But don’t let that stop you from paying on a precise schedule. Delinquent accounts are highly negative. Make sure those accounts don’t end up on your credit report and built that good credit by paying on time, every time.
- Tip: Have a balance? That’s okay! You’re not alone. A lot of people can’t pay off there balance in full each and every month. Just be sure you’re not paying off only the minimum amount of your credit card each month, and be sure to pay off that balance as quickly as you can.