Building Good Credit From Scratch: Tips For Young Adults

Hey there, fellow young adult! 👋 You’re probably aware that building good credit is one of the essential steps to securing your financial future. But if you’re like me, you might not have a clue on where to start. Fret not, for I have compiled a list of tips on how to build good credit.

Why Good Credit Matters

Before we dive into the tips, let’s first discuss why good credit is essential. Having good credit enables you to access better loan rates, credit card rewards, and insurance premiums. Plus, maintaining good credit shows that you’re responsible with money management, which can boost your credibility when applying for jobs or housing. So, it’s crucial to start building your credit as early as possible to reap its benefits.

Get a Credit Card - But Use it Wisely

Getting your own credit card is the first step towards building good credit - but don’t go swiping for everything just yet. 🛍️ Instead, use your credit card wisely. Only use it for essential purchases that you can afford to pay off in full every month. This means avoiding spending more than your credit limit and making sure to pay your bill on time. Late payments can damage your credit score, so be sure to set up reminders or automatic payments to avoid them.

Choose the Right Type of Card

When it comes to picking the right type of card, consider getting a secured credit card that requires a cash deposit. This type of card is designed for people who are new to credit and can’t yet qualify for an unsecured card. With a secured credit card, your credit limit is typically equal to your cash deposit. You can then use your secured credit card, just like a regular credit card, to start building your credit score.

Monitor Your Credit Score

Your credit score is a numerical representation of your creditworthiness. It’s essential to monitor your score regularly to ensure that you’re on the right track towards good credit. You can check your score for free once a year from each of the three major credit bureaus (i.e., TransUnion, Equifax, and Experian). Additionally, there are various websites and credit apps that offer daily credit score updates, which can help you stay on top of your score.

Keep Your Credit Utilization Low

Credit utilization is the percentage of your credit limit that you’re currently using. It’s essential to keep this number low to show that you’re not maxing out your available credit. A good rule of thumb is to keep your credit utilization under 30%. For example, if you have a credit limit of $1,000, try to keep your balance under $300.

Be Patient - Building Good Credit Takes Time

Building good credit is a marathon, not a sprint 🏃🏻‍♀️. Be patient and don’t expect to see significant changes to your credit score overnight. It takes time to build a good credit score, and it’s crucial to stay consistent with your responsible credit card habits. Keep making timely payments and keeping your credit utilization low, and you’ll start seeing the fruits of your labor in due time.

In Conclusion

And that’s it - our top tips for building good credit from scratch. Remember to use your credit card wisely, monitor your credit score, keep your credit utilization low, and be patient. It may seem challenging at first, but building good credit is one of the best investments you can make for your financial future. 💰