4 Tips to Help You Build Your Credit
One of the things you don’t realize about adulthood is that credit is quite powerful, especially when you’re not well off. Having good credit, or even great credit, for that matter, not only represents your ability to purchase but marks you off as a “trustworthy and responsible adult” to lenders. Lenders that you may call upon for slight assistance when purchasing that new car or future home.
Here are a few examples of why good/great credit is important:
It’s really hard to get a home on bad credit and if you buy a car on bad credit, expect that interest rate and monthly payments to be very high. Alternative is to have a co-signer with amazing credit but let’s be real, how many people will actually put their credit on the line for you?
It’s not impossible to open a credit card, as there are secure and student cards that you may be approved for. However, you won’t get the ones with great benefits such as the Chase Sapphire card (which is ahhhh-mazing).
You’ll most likely only qualify for those short-term loans that will cost you double the amount to pay back (if you need an emergency loan). Interest rates are typically 35%+ on these loans.
Get my point? Your credit score doesn’t really define you but it’ll certainly put you in a lane that you’ll most likely NOT want to be in.
Below are a few tips that can help you build up your credit:
Did you know the minute you take out a student loan, it counts towards your credit? Taking a student loan can help you build your credit, if you are paying it off each month - on-time. To clarify, it does not mean you automatically get “good credit” by taking the loan out, as you have to maintain your debt in order for it to be in good standing.
Be an authorized user on your parent’s, siblings, or significant other’s credit cards (assuming they have good/great credit and trust you). It’s believed that when most people owe money to someone else and/or are risking someone else’s reputation, they are more than likely to make sure they don’t fuck it up. That’s not to say that shit doesn’t happen and that people don’t ruin other people’s credit this way, but how much you trust that person is up to you. It is a good way to help someone you love build their credit, if you allow them to be an authorized user.
As mentioned above, secured credit cards and student cards are meant to help you build credit. Generally, you have to put a deposit down, which sometimes can equate to your credit line and/or be refundable upon evidence of good standing. There are several credit card companies that offer this but always check with your bank account first, as they typically offer the best APR and/or benefits.
Add a co-signer onto your applications, when/if possible, particularly when it comes to car, apartment leases, and/or home purchases. Providing a guaranteer will get you a higher chance of being approved, but again, finding someone to put their name and credit on the line may be difficult. Again, you really have to maintain your debt as well so you don’t screw your co-signer over!
P.S. Review your credit report every month to keep track of your credit score. Most banks offer a free credit report, but if not, Credit Karma is a great alternative to monitor and track your credit score.
Please be advised that these are tips to help you build credit, not increase your current credit score. If you’d like to learn how to increase your credit score to have more spending power, check this tip out, which also helps you avoid paying higher interest rates.
Stay tuned for other articles on how to strategically increase your credit score!
Originally written by Sho with editing by Lisa Linh.
About Shoshanna: Sho is a DIY financial guru, known for her money tips and advise on credit card debt and is an expert on budgeting. She's helped several people raise their credit score, pay off their credit card debt, and also assists those in their taxes. She is currently focused on her medical career, but offers financial tips on ByLisaLinh.com during her free time.