Buying on credit is nothing new. Getting a loan for your new car or a house is common. However, what’s important here is your credit eligibility and your credit score. It is advisable that you build your credit score as early as you can. It will help you have a diverse credit history, utilization and a better chance to get a loan or more credit.
If you’re just starting, you might be confused as to how you can build your credit score, right? Well, there is more than one way that can help you build a good credit score. In this article, we have listed some amazing ways in which you can build credit. And the best time to do it is now!
Why a credit score is important?
Before you start to build your credit score, it is necessary that you know the basics. A credit score is like a book or a scorecard that tells your creditor how financially stable you are and how financially responsible you are. It ranges from 300 to 850.
Credit score is calculated on the basis of how much debt you owe and how you treat your credits. It tells the lender of your credibility towards paying back debt. Your loan interest and great offers are based on your credit score. Even your employer has the authority to get a check on your credit history and score.
Fun fact: Do you know that in the United States, almost 40% of people aged between 20 to 24 have almost zero credit history. When it comes to the overall population, this number comes up to around 20%.
If it is your first time, you may feel intimidated to create your credit history, but with simple habits, you can easily make it up in no time. Let’s look at the ways in which you can create a credit score for yourself.
Get a credit card
A credit card is the best way to create your credit. Though if you do not take care and pay your dues on time, it can also become a curse. For a start, you can buy a credit card having a lower limit and eventually increase it as you feel comfortable paying back your debt.
After turning 18, you can apply for a credit card if you are earning. In case you are not earning then you will have to wait for turn 21. You can also buy a secured credit card where you will have to deposit a certain amount and until and unless you pay it back, the amount would be kept with the bank or the credit card company.
Take a loan
Taking a loan is another way to build your credit score. Though it doesn’t mean that you get loans blindly. If you are a student, you can take an education loan. When you plan to buy a car, you can apply for a car loan and so on.
When you are taking a federal student loan, the good news is that you do not have to qualify for credit. But if you are a private student, you may have to qualify for it. So based on your preferences, taking up a loan will help you build credit history and credit score.
Pay your monthly bills on time
If you are on your own, when you pay utility bills, rent or mobile bills, it can be reported to credit bureaus. You can ask the company providing the services to report it to credit bureaus and there is no harm in trying.
Also, you need to know that sometimes there is a little fee you need to pay while reporting payments. This would not always have an impact on your credit score but it would definitely show on your credit report.
Now that you’re all up to speed on how to build your credit score, read more on why credit score matters.
