Lessons We’ve Learned About Building Credit

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Here at NerdWallet, we may be personal finance experts — but that doesn’t mean we always knew the answers when it came to our own finances. In honor of Financial Literacy Month, some of our Nerds are sharing money mistakes they made and lessons they learned along the way.

In the last two weeks we’ve shared employee stories about overcoming debt and saving for retirement. This week, we’re looking at building credit.

Stay tuned: Next week our employees will tell their stories about buying a house. And be sure to follow us on Twitter and Facebook for more great tips during Financial Literacy Month.

Abigail Andrews, BizOps pro at NerdWallet

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What do you wish you’d known when first starting to build your credit?

“I got a credit card early enough, at the beginning of college, that by the time I graduated I had enough credit history to have decent credit. However, I also made a lot of mistakes because I didn’t know better, and I didn’t take the time to actually understand the drivers of credit, like making your credit card payments on time and eventually increasing your credit limit to keep your utilization low.

“It wasn’t until a year or so out of college that I became even somewhat intentional about building my credit. By that point, my credit score was fairly good, because I had a long credit history and had made most of my payments on time.

“I applied for a better credit card and slowly increased my credit limit so my utilization went down, and over time my credit score increased into the excellent range. But it took time to build my history until old missed payments from college disappeared, and I wish I had applied for better credit cards earlier on.

“I stumbled into having decent credit and was able to eventually build from there, but I wish I had been more thoughtful and known more earlier on. I got lucky, and I can see how easy it is to end up in the real world with no credit history or a low credit score. In San Francisco, that makes it really hard to get an apartment. When you start to think beyond your mid-20s, where I am right now, it also means that it just takes longer to build up to excellent credit.

“I’m 25 and have excellent credit today but I can’t even take credit for it. I just got really lucky, and didn’t screw up too badly.”

What would you tell your younger self when it comes to building your credit?

“Start early and take the time to understand the basics of credit card use. It’s easy to avoid the big mistakes if you know what they are. I didn’t do anything catastrophic, but for several years there were missed payments on my credit history because of a department store credit card I shouldn’t have opened. I didn’t really understand how it worked or how to access the account, and while I barely ever used it, I carried over a small balance for a long time before realizing it. Even that (little amount) hurt my credit for a while!

“I would tell my younger self to manage my balances carefully and set up reminders to pay my bills on time. I would also force myself to ask questions and seek more information so I actually understood what elements impact your credit score. I didn’t have a clue, and I was just blindly hoping that using my credit card semi-responsibly would eventually give me solid credit. I never overspent my means, but I didn’t know for a long time that carrying a balance hurts your credit score. Luckily, I’ve had enough time to correct for that.”

What is the most challenging thing you’ve faced when building your credit?

“Lack of actionable knowledge. I knew that building my credit was important, but I didn’t have a deep understanding of why, nor did I know how to actually do it. I knew that I needed to have a credit card to build my credit, and that was about it.

“I stumbled into having good credit because eventually I proactively improved my understanding of the how and why, but not before I had missed a few payments and missed several opportunities to improve my score earlier on.

“I have so many friends who didn’t get a credit card until after college and have struggled to build credit history; I ended up OK because someone told me to get a credit card early and I didn’t screw it up too badly, but I easily could have.”

 

Jazeena Baeza, design pro at NerdWallet

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What were the biggest or most unexpected lessons you’ve learned when it comes to building your credit?

“Start as soon as possible!

“I’m not an expert in building credit by any means, but thanks to my parents, I got started at a young age. In high school I opened a bank account to keep baby-sitting money I had earned. Once I got a part-time job, I was able to start saving for a car and a few years later my dad co-signed on a car loan, which started building my credit.

“I was very diligent about paying my bill on time. Then Wells Fargo offered me an opportunity to get a college credit card with a really low APR since I had been banking with them for a few years. Between the car loan and the credit card I was off to a good start.

“I’m really thankful my parents helped me start building my credit so young.”

What do you wish you’d known when first starting to build your credit?

“I wish I would have better understood why credit is important and how it worked.

“In college I worked a lot and had a good amount saved away, but my senior year I wanted to focus on school so I stopped working and put a lot on my credit card. Even though I had the money to pay off the high balance, I would only pay the minimum each month.

“Looking back, this dinged my credit because I carried a high balance from month to month. I wish I wouldn’t have done that, because it takes time to bring your credit back up.”

What would you tell your younger self when it comes to building your credit?

“Don’t spend money you don’t have! This seems obvious, but my younger self definitely spent more money than I had in my bank account. I got into some credit card debt when I did that; I’d have unexpected expenses come up (like a speeding ticket, or my car needed to be fixed) and all of a sudden I’d dug myself into a hole for that month. I was then putting necessities on my credit card, like groceries or rent.

“Looking back, it was a good learning experience — but if I could’ve avoided it, that would’ve been much better!”

What is the most challenging thing you’ve faced when building your credit?

“Building your credit takes time and persistence.

“It can be challenging and it isn’t always easy, even during financially good times. I think it is important to always budget, whether you are trying to make strides to get out of debt or save toward something like a down payment on a house.

“Budgeting is no fun, but it can really help manage your spending and help toward building your credit.”

 

Graham Ober, product pro at NerdWallet

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What were the biggest or most unexpected lessons you’ve learned when it comes to building your credit?

“How important it is to start early! Making small mistakes early on in your credit history can cause a ripple effect that will haunt you for years.

“In retrospect, I realize how important the early decisions are — because they really set you up for either success or failure.”

What would you tell your younger self when it comes to building your credit?

“To open a credit card with no annual fee when I was first eligible and never close it.”

What is the most challenging thing you’ve faced when building your credit?

“Recovering from accidentally closing my first credit card. I didn’t know that the length of your credit history is a big deal — the longer you’ve had a credit account, the better it is for your credit score. I wish I had known that I should have kept it open; it really would have saved me a big headache!”