It’s impossible to overemphasize the importance of good credit, and the earlier you commit to it, the better. After all, it can take years to repair a few months — or days — of irresponsible spending. If you’ve been smart about credit from the get-go, you have a head start on buying a house and other major financial decisions.
The good news? There are just a few essential steps to help build good credit, and you can begin before you turn 21.
According to the Credit CARD Act of 2009, you must be 21 to sign up for your own credit card, unless you prove you can pay the bills. Even if you’re old enough, it may be difficult to qualify for the best good credit credit cards. Applying through a bank or credit union at which you already have an account or opting for a secured card may help.
Because the length of your credit history is vital to your credit score, you may want to start earlier. Ask your parents whether you can become an authorized user on one of their accounts, or whether they’ll cosign on one for you. But be careful. Any bad decisions you make with a shared card will affect those with whom you share it.
Keep applications to a minimum
Ignore the urge to continue applying for credit, now that you’ve gotten one card — at least for now. Applications show up on your credit report and cause a temporary, negative effect that will be more noticeable because of your short history. Not only that, but more available credit could be an invitation to overspend. Instead, do your research before signing up and find the card that’s the best fit for you.
Avoid the temptation to help your friends
Just because you had help getting credit doesn’t mean you have to help anyone else. If friends ask you to co-sign on a card for them, or authorize them to use one of yours, say no. You may think your friends handle money well and won’t run up a balance on the card, but that’s not a chance you can afford to take, especially when you’re young.
Pay all your bills on time
Shorting your landlord or cellphone company so you can pay off your balance isn’t the way to build a good credit score. Credit bureaus now pull information from sources besides credit card companies, so a late payment on a utility bill may come back to haunt you, even if it doesn’t go to collection. If you don’t have a reasonable budget, you’ll have a hard time establishing good credit.
The bottom line
Of course, the best way to help your credit score is to use your card responsibly. Paying off your bill in full each month is important, but it’s not the only factor. Using more than 30% of your available credit from month to month — that is, having a high credit utilization rate — looks bad to credit issuers and will also affect your score. It may be hard to stay below this threshold if you have a low limit, but learning not to charge too much will benefit your budget and your credit score. With the right habits, you’ll qualify for credit cards for people with good credit in no time.
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