How to Build Good Credit as Early as Possible
Good credit can make your life easier. It gives you so much power, including the ability to buy your first home, finance your education, get better insurance rates, and even improve your chances of landing a job.
The moment you secure your first credit card, everything you do becomes a part of your credit history. Use your credit responsibly and you will build good credit immediately. Below are some tips to keep you on the right track.
1. Borrow what you can afford.
Charge only what you can afford. Using your credit card to buy things that you cannot pay with cash is the fastest way to a debt problem. Only borrow what you can afford to repay. This shows lenders you are a responsible borrower, which also makes it easier for you to borrow later. Do the same for loans. Regardless of what the lender says you qualify for, you should only borrow what you can payback.
2. Avoid maxing your credit card.
Maxing out your credit card, or even coming close, is not a healthy practice. Statistics show that people who max out their credit cards often have difficulty repaying what they borrowed. It is always smart to only use a small amount of the credit you have available. Keeping your balance below 30% of your credit limit is best for building good credit.
3. Use one credit card.
Do not be tempted to accumulate too many credit cards. The more credit you have, the more you are likely to spend, and the more debt you will have to repay. Too many inquiries into your credit and too many new credit cards can negatively affect your credit score, too.
4. Pay your balance in full.
If you are only charging what you can afford to pay, then you will have no trouble paying your balance in full at the end of every month. This is a responsible behavior that is rewarded with good credit. A large part of your credit score is clearing your debts and doing so on time. Late payments impact your credit negatively. Make sure you pay on time to avoid negative accounts from being added to your credit report to build a good credit score.
5. Let your accounts age.
A long credit history reflects positively on your credit score. Leave your oldest accounts open since they help increase your credit age. It will be a plus in the eyes of your creditors and will help you build good credit.