Getting an education is an essential tool which will benefit you in the future. Having good credit is just as important to help ensure your stability and help you successfully do things such as rent an apartment, buy or lease a car, and even get a good job. It is often said, a good name is priceless in life and so too is a solid credit history. Maintaining good credit will afford you many opportunities that would otherwise be impossible. It can show stability, consistency, responsibility and maturity – all of which are positive traits that can help you succeed in life. Do your long term goals include owning your own home? Would you like to land the job of your dreams? Here are a few tips on how to build good credit to live a more fulfilling life.
Enlist the Help of Parents
Until you are 21 years old or can show a steady source of income, federal law doesn’t allow you to open a credit card on your own. One way to begin to build your own credit history is to become an authorized user on your parent’s credit card account. If your parents have good credit, being an authorized user and properly utilizing its benefits will provide you with a solid foundation upon which to build in the future. This option allows your parents to monitor your spending and for you to learn to use credit wisely.
Open Your Own Credit Card Account
Getting the “right” credit card for you is more than just signing up for the first offer that comes through the mail. Be on the lookout for low interest rates, no annual fees, and manageable credit limits. The key is to be responsible. Pay your bill in full and on time each month. Use your card for small purchases every month so that the balance will be easy to pay back when the bill arrives. Having one account where you continuously are in good standing boosts your credit score. Be sure not to apply for multiple cards at once. Applying for several lines of credit in a short period of time can actually make your credit score fall.
Pay Off Balances Monthly
In order to make the most of your new credit card account, have it work to your advantage by paying off the entire balance each and every month. When you carry a balance, you pay unnecessary interest. A balance also shows that you are living above your means. Credit cards should be used for convenience and as a means not to carry large amounts of money. Although living frugally may not seem rewarding at first, it will appear so in the long run. Be smart and pay off your credit card balance each month to help boost your credit history.
Practice Good Financial Habits
If you are trying to achieve and maintain good credit, pay all of your bills on time every month, including student loans, car payments, rent and credit card payments.Cell phones, cable, medical bills, and utilities may seem harmless when it comes to your credit. However, not paying them on time can negatively impact your good name and possibly lower your score Tip: 35% of an indivudal’s credit score is derived from “on time payments,” so use this fact to your advantage.
Keep it simple and use the funds from your loans for educational purposes only. Although it may seem tempting to splurge on something you really want, return all refunds to the lender. Using excess loan proceeds today isn't a wise decision since that money must be paid back with accrued interest over many years. Borrow as little as possible and remember to pay on time. If you ever have difficulty making a monthly payment – pick up the phone and call your loan servicer. Explain the situation. They will select the correct “tool” to help get you through the financial rough spot. Never do nothing at all. Paying student loans can be a great way to build your credit history, but failure to pay can also be damaging to your credit, so be responsible.
Do you know how to build good credit throughout college? Visit RISLA's financial literacy site for more free tips and to download a guide to understanding credit.