What is the correct way to build my credit history?

Question

I just turned 18 and I wanna build my credit history right. What is the best and right way to do so?

Answer 1

1. Get a credit card, preferably a secured credit card (one where you give them some money, the money you give them is the amount of credit you have on that card. Give them 400, you then have 400 dollars credit. This is so you never go over the limit, and if for some reason you dont pay your montly balance, the money you gave them will be used to pay the balance for that month. This is so you dont hurt your credit score).
2. Always pay your bill on time or ahead of time.
3. Have 2 to 3 credit cards. No more, no less. Creditors like that you have multiple cards, but not alot. They also love to see the balance at "0". Dont keep your credit cards sitting at over 60 to 70% of the credit limit. If you have a 2000 dollar credit limit, dont let your balance sit too long at around 1400 or more. And never keep it too close to the limit!
4. Never ever close a credit card. When you do not want a credit card anymore, pay off the entire balance, keep your payment reciepts for future reference, and never use the card again. When creditors look at the card history, they will see a "0" and give you points. However, when they see "card closed" , they assume you had credit trouble. Stupid, but its true.
5. If you can, pay the entire balance off every month!! Credit card companies make billions of dollars off of those monthly interest charges. Think about it, if you only pay the minimum payment each month, they charge you money, could be 10 bucks, or could be 60 or 70 depending on your balance. This is basically throwing money out the window!

Since i have had 3 credit cards, i have always paid the entired balance off each month. I opened a store credit card (Dillards) and paid the minimum payment for a few months, until i realized they were charging me almost 25 bucks a month just for the interest. I realize i work way too hard for them to just take my money like that when i could have just paid the whole balance off and had not been charged that money. If you pay the entire balance off each month, a credit card can be your best friend!

Answer 2

It seems strange, since credit cards usually cause so much credit trouble, but get one with a low limit, no annual fee, and pay it off completely each month. Just use it for stuff you use anyway.

I wish I had done this when I was 18. Now I'm older, and even though I don't have bad credit, I don't have any credit history, which has been bad for me. Just be careful, and pay everything on time. Other bills count too, cell phone, rent, whatever.

Don't worry about diversity in your credit, that will come. You just need one card to get a credit history started on you, worry about the rest later.

Answer 3

It will take time but you are lucky that you are thinking about this when you are young. You wont have great credit for at least 7 years even if you do everything correctly because one of the factors used ion credit scoring is the average length of time your accounts have been open, another reason it is good that you are starting out when you are 18.

Open one or two credit card and use it responsibly. Never use more than 30% of your available credit at one time. Of coarse always pay your bill on time. Try to apply for a card that is easy to get like a student card, department store card, or even a secured card. Note that some department store cards are actually hard to get like sears or target. I would recommend the best buy card (not the bb mastercard). I used to have pretty bad credit when i applied for mine and i got approved for $1800. My girlfriend had no credit history when she got hers and she got approved for $600.

Do not open several cards at once because this will make you look like you are desperate for credit and will hurt your score. Every time you apply for credit will also temporarily hurt your score.

Building credit is much less complicated then trying to fix bad credit so other than that i don't really have much else to tell you. It all just takes time. Open one or two credit cards, use them wisely like i said and dont apply for any more for at least a year.

An auto loan is also very good for building credit as long you always pay on time. You probably cannot get approved for an auto loan if you do not have any established credit unless you have a co-signer. If a co-signer is possible then it would be a great thing to have on your credit file. It not only is another opportunity to prove that you can manage your credit wisely but creditors like to see a mix of different types of accounts so it would be great to go along with your new credit card. Im not saying go out and buy a car just to build credit but if you happen to need a car then try to finance it in your name.

The only other thing you can do is ask your parents to add you as an authorized user on some on their credit accounts. This will instantly add positive accounts to your credit profile. Before you do this make sure the accounts that you are being added to have high limits, low balances, have been open for several years, and have never had late payments. However I believe that fico has announced they will stop using authorized user accounts in their scoring sometime soon.

Dont listen to the people to tell you to stay away from credit. They are wrong. There is a difference between saving money and building credit. Those books Kaffegeep (or whatever) mentioned might be great for creating your fortune but thats not what we are talking about here. Your income means nothing in your credit score (its not even listed on your credit report) and having a big down payment to put on a house is great but unless you have some credit experience to prove to the lender that you are responsible you wont get approved for a loan in the first place.

Answer 4

Get a credit card with a very high interest rate....Use it once a month to fill up your gas tank or something...pay that 40 dollars or so right back and keep on doing that for a while....Your credit will skyrocket!

Answer 5

Make sure you pay on time. Do not fall into the habit of sending late credit card payments. You will be penalized and you will also have a higher interest rate. When the creditors see that you have good payment history, it will be easier to secure a car or house loan.

Answer 6

If you have bad or no credit and have no credit cards try to obtain two credit cards and make sure all of your monthly payments are made on time. This will help increase your credit score. If you cannot be approved for a unsecured credit card, obtain a secured credit card.

Answer 7

Make sure that you have a bank account(s), in good standing (both savings and checking accounts would be helpful). Get a credit card with a very low line of credit (perhaps through your bank). Make small purchases and pay them off each month. Be patient, before you know it you will have stellar credit!

Answer 8

Have a checking account get 2 credit cards use only up to Half of their limit and pay them off quickly constantly using them

Answer 9

Pay your bills on time. That is the most important thing.

You can try to get a credit card from your bank. Use it and pay it off in full each month. Don't carry balances on credit cards.

Answer 10

dont worry about it, it will just happen.

as you go to college you will get cc offers.

first of all THROW THEM AWAY !!!

a big down payment from savings is more important.
a good job with history of steady income is more important.

I know the credit industry wants you to think you must borrow but its not true.

rare exceptions. would be that house. but your first one will be fdic guraranteed so the big downpayment so they have equity means more.

read "the millionair nextdoor" and "the richest man in babylon" and do some research. saynotobankruptcy.com daveramsey.com and ricedelman.com

relax, have fun, dont waste your youth!!