A Beginners Guide to Building Good Credit
Credit scores are an important part of being a successful adult and take a bit of work on your part to increase your score to a healthy level. Possibly the oddest part about increasing your credit is having to get credit in the first place.
If you’re wondering where to even begin on getting credit, building good credit, and maintaining your credit then you’ll want to keep reading!
Car Loans, Mortgages, Credit Cards, and Student Loans Help
The first step in starting your credit building journey is figuring out what credit you can sign up for to start building good credit.
The easiest one to get started with is a starter credit card and check identity fraud protection. A credit card works in a way where you are given an amount of credit to use each month and pay it back to the bank by a certain day. This demonstrates that you can pay back what you borrow.
Other types of borrowing that build your credit are car loans, mortgages, and student loans where you are given a higher amount of money and pay it back over a certain amount of time. These bigger loans help in building your credit at a much higher rate over time.
You can check your credit score online for free without any impact on your score to see where you’re at.
Get Yourself One Credit Card At a Time
It’s tempting to get more than one credit card at a time to help you in building your credit but it doesn’t work that way.
You could find your way down a slippery slope by borrowing too much money at a time and can end up doing more harm than good when it comes to your credit score, and have way too much debt to deal with. Leanders will not want to give you anything or if they do, at a very bad rate.
Get one credit card with a credit limit that works best for your spending habits and not too much where there’s a potential for credit trouble. You can learn more here about the types of credit cards.
Don’t Max Out Your Credit Limits
On top of not wanting to be in credit trouble, something that most people don’t know about is that just because you have a certain limit on your card doesn’t mean you’re supposed to use it all.
In order to be building good credit, you will want to make sure you’re not using more than 50-75% of the limit on your card. A maxed-out card doesn’t look good to banks because they give you an amount that is slightly more than you make in a month.
This goes to show that you’re an over-spender and a bad financial risk. Banks will not want to give you good rates on any loans you may be needing in the future.
Pay Your Cards in Full and On-Time
Credit cards offer the ability to carry balances from one month to the other.
It can be tempting to overspend and rely on only paying off a portion of the amount due and put it off to another month to deal with. This is bad credit practice as carrying balances tells the bank that you can’t pay what you spend and therefore as a bad risk. They send this information to the credit bureau which adjusts your score.
Try to pay off your card a bit before the due date and the rest on the due date, or all in one go before it’s due. It will help in building better credit.
In events you can’t pay the balance, do your best to pay the minimum balance at all times.
Don’t Overborrow
When taking out any loan or credit, don’t go for the absolute max if it’s more than you need.
Overborrowing can be the difference between spending what you need and spending what you definitely don’t. Overdrawing can leave with you debt and bad rates for life. If you don’t want to spend the rest of your life paying the same loan bill over and over then skip on the unneeded high loan amount.
It’s a good idea to talk to a financial advisor for a loan plan and guidance on your spending and usage. A financial advisor will also walk you through a payment plan that works with your budget. Don’t skip on the free consult at your local bank.
Credit Accounts Are Like Wine, They Get Better With Age
When building your credit score you have to play the long game.
The long game is being patient with your credit score growth and giving your loan and credit accounts the time to accrue and work for you. The banks will want to see how you use your credit and loans over a longer period of time to be able to see your spending trends and habits.
Once they have gathered that information they are able to apply a score to you that will either help you or harm you. This is why it’s important to be on top of your payments.
Don’t get discouraged if you have an overspend once in a while, the bank looks at the average trends to score you. Just try not to make it a habit so it doesn’t really impact your score.
Building Good Credit Takes Time
Good credit doesn’t just happen. If you’re looking to improve your credit score, Imax Credit Repair Firm can help. Visit iMax Credit’s new location for credit repair services.
It will take work on your end to help in building good credit. Get a good interest credit card like a student card if you’re in school or a low-interest card if you’re just starting out. The most important thing to remember on your credit building journey is paying your bills on time.
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