The Do's and Don'ts of Building Credit From Scratch 💳

Hello there! 👋

Are you someone who wants to build their credit from scratch, but you’re not quite sure where to start? Building your credit score may seem like an overwhelming process, but by following some basic guidelines, you can take control of your finances and create a beneficial financial future for yourself.

Whether you’re an ambitious student starting your first job, a recent graduate or you simply haven’t built your credit yet, we have put together a list of do’s and don’ts to help guide you through the process.

Do Get a Credit Card (But Use it Responsibly) 💳

Getting a credit card can be a great way to start building your credit. Using a credit card helps you establish a credit history. However, it’s essential to use it responsibly. Only charge what you can afford to pay off every month.

If you don’t current can’t qualify for a traditional credit card, consider beginning with a secured credit card. A protected credit card is when you place a deposit down that becomes your credit limit. Regular payments on a secured card will improve your credit score similarly to a traditional credit card.

Don’t Max Out Your Credit Card 💸

Maxing out your credit card is not a smart way to establish your credit. It can quickly increase the amount of money you owe, which can become problematic if you can’t pay off the balance.

You should try to maintain the credit utilization ratio below 30% if possible. Keeping your balance low is a perfect way to help build your credit score and demonstrate that you are responsible with your finances.

Do Pay Your Bills On Time and In Full 📅

Paying your bills on time is crucial for establishing good credit. Late payments signal to potential lenders that you may be risky to loan money to. A stable history of on-time payments allows creditors to see that you’re a reliable borrower.

Missing or late payments can cause your credit score to plummet, and it can take months to offset the damage done by missed payments.

Don’t Ignore Your Credit Reports 🕵️

Checking your credit reports helps to ensure that it is error-free and up-to-date accurately. Inaccuracies on your credit report can decrease your credit score. It’s important to keep an eye on your credit report to see any fraud or incorrect information that could be damaging your score.

If you identify errors, you can dispute them with the credit bureau and have them corrected, which will help to increase your score.

Do Plan Ahead ✅

A well-thought-out budget and financial strategy can be an effective tool to start building your credit and control your spending. Plan ahead and avoid purchases that you can’t afford to pay off in full.

Living within your budget will demonstrate that you have financial goals and priorities in line and are capable of making smart financial decisions.

Don’t Apply For Multiple Lines of Credit 👎

Applying for many lines of credit simultaneously, especially if it leads to multiple credit pulls, can hurt your credit score. If lenders see that you’re applying for credit and opening multiple accounts suddenly, it can indicate you’re struggling financially.

It can be worthwhile to be patient and wait until you are ready to apply or when you have a secured income stream.

By following these simple guidelines, you can start building your credit score and take your finances into your hands. Remember, establishing good credit takes time and Strategic effort, and teamwork with your bank or credit institution to build a perfect financial foundation.

Thanks for taking the time to read our blog. We hope you enjoyed it and found it valuable. Have a great day! 😄