How to Build Good Credit

Building credit is becoming increasingly important for financial freedom, stability, and comfortability. Without a decent credit score, or a credit score at all, you may find yourself facing serious hardships when trying to purchase a car or house, or when applying for loans or other credit cards. A good credit score means a good credit history, which means banks will be much more willing to work with you and grant your financial needs because of your responsible history. 

However, even just starting up a credit card so you can establish a credit history is becoming more and more difficult, especially since the enactment of the Credit CARD Act of 2010. 

There are ten fairly easy tips that, if followed responsibly, can help you create and maintain a healthy credit score, and therefore, a healthy financial future. 

1. Become an authorized user on your parents account: “Piggybacking” is a great way to get your credit started; if your parents have good credit, your credit automatically gets a boost. 

2. Get your own credit card: Putting a credit card in your own name is the best way to build credit. Your first credit card should have a low limit, low interest, and no frills. 

3. Pick the right card: Do some research to find the best card that offers the best deals and/or rewards for your liking. 

4. Use the card for small purchases: Only use the card for small purchases that you can repay, such as gas or your Netflix account. 

5. Avoid large purchases: Credit cards are here to help you manage your finances; if you keep your balance low, then you can have room for those emergency purchases, such as auto repairs.

6. Pay off monthly balance: If you keep your spending low during the month, paying off your monthly balance is easy. When you pay off your balance each month, your credit score increases dramatically as opposed to leaving a standing balance. 

7. Pay bills on time: Your credit score is no longer only affected by your credit card use. Now, paying your utility bill late, or mismanaging your student loans can have an adverse effect on your credit score, so pay everything in a timely manner and keep your loans organized. 

8. Don’t co-sign for buddies: Since you need someone over 21 years of age to co-sign for a credit card if you are underage, sometimes a friend might ask for you to co-sign. Don’t do it. Any mistakes they make, whether intentional or not, can seriously bruise your own credit score and even make you liable for any of their outstanding debt. 

9. Don’t over apply: Applying for multiple credit cards at a time, especially retail cards, can cause your credit score to immediately fail, especially if you don’t have much credit history. 

10. Use your student loans for education only: Student loans can be hefty and take decades to pay off, so using your loans to buy a car, for example, is only hindering your long-term financial freedom: only use student loans for education expenses. 

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