Before making any big life decisions, you need to have credit. Qualifying to rent a home, buying a car, applying for credit cards- you’ll need a decent credit score to do any of these things. But how do you start building your score when you’re starting from scratch?
Building a credit score doesn’t need to be too complicated. In fact, you can increase your score with just 3 simple steps.
1. Get a Credit Card
If you don’t have any credit history, it may be difficult to apply for a card. However, there are secured credit card options that make it possible for you to receive one with no history.
Having a secured credit card requires a deposit before using it. You can use this card to build a credit history that will help you qualify for unsecured credit cards, transitioning into using other cards with greater benefits.
2. Make Consistent Payments
In order to build credit, you need a good credit history. This requires you to not only use your credit card regularly but to pay the credit card bills on time. If you pay a bill late, that can do some serious damage to your score.
When you’re just starting out, it’s best to use your credit card to pay for recurring expenses that are already in your budget. These kinds of recurring expenses might include gas, subscriptions, or weekly groceries. Be careful not to use your card to purchase items that you don’t yet have the money for, as that can harm your ability to pay your credit card bill in a timely manner.
3. Get a Co-Signer
In all honesty, building credit takes time. There’s no skipping steps or taking shortcuts, and sometimes that gradual timeline can work against you. If you’re trying to qualify to buy a car or pay rent, it may be best to get a cosigner until you’ve established a better score.
If you choose to have a cosigner, be sure that it’s someone trustworthy and responsible with their credit usage. If their score is affected by a risky financial choice, you will also be affected. Likewise, if you are irresponsible with their score, it will impact your cosigner negatively.