You’re either still in school or recently graduated, and during these heady times, when you’re just starting out and your whole life is before you, your credit score may not be a priority. In fact, you may not have thought much about it at all.
The reality, however, is that now is the perfect time for you to be establishing credit, since you’ll need it for nearly every big move in your life, from getting a loan to start a business, renting an apartment to maybe even gaining employment. How fast you can establish credit – and propel your score upward – hinges on how you deal with your finances and debt.
Keep reading for more on building credit while in your 20s.
Pay Those Bills on Time
You may not have many, but the bills that you do have must be paid in a timely manner – and in full, to avoid interest charges that can add up and spiral out of control and have you playing catch up. If you cannot pay in full, be sure to make the minimum payment. Late payments can send your credit score tumbling.
Even if all you have right now are utilities and a cell phone, these companies sometimes report late payments as well. Take note.
Get a Credit Card
If you have what lenders call a “thin file,” meaning you have little to nothing showing on your credit report, you may have difficulty getting a credit card. To start building credit, you might want to get a secured credit card. With one of those, you put down a security deposit that will be equal to your credit limit. If you keep your payments up before you know it you will be eligible for an unsecured card. Likely with a larger credit line.
You also may want to cast about cards that are designed for student use, which some banks issue to help students establish credit. Just don’t put your tuition on the card; that’s no way to start out. Do you have to pay back grants (4100)? If you do, don’t put those payments on your card, either.
Another option is to ask one of your parents or a relative who has good credit to make you an authorized user on one of their credit cards, which will show up on your report. Just be sure to honor this gift by treating it responsibly.
Don’t Max Out Those Cards
How long does it take to build credit? That depends on your early moves. If you managed to get a credit card, for instance, don’t offset that positive by using all your available credit. Lenders don’t like to see this, even if you pay your whole balance each month. You should aim to keep your borrowing under 30% of your overall available credit. Your utilization rate is important to building and keeping good credit.
Keep Tabs on Your Credit Score
You can get a free copy of your credit report each year, and you should take advantage of that to see how you’re faring, and whether there are mistakes, any fraud, etc. You don’t want any slippage in this area.
As you can see, building credit in your 20s takes deliberate steps; it doesn’t just happen. It’s wise for you to start early on this and keep the momentum going, even if your pals aren’t into it (they will be trying to catch up later). Part of establishing good financial habits means getting the best interest rates. So, if you need student loans, Juno is the place to go.
