“Oh, I don’t do credit; I pay cash for all of my stuff.” I hear this exact statement just about every day at my job when I try to get someone to open a credit account, but what some people don’t understand is everyone needs to have some credit established. I understand some people like to pay cash for everything, but somethings you need credit for. Want to buy a car? Want to buy a house? You need credit! I started on my credit at a young age and I was able to buy myself a car for my 20th birthday! I’m nowhere near an expert on credit, but I’ve taken a few courses, and I have a few tips to share on establishing credit.
- Start young
Start building your credit in high school. If you are a parent, add your children onto your credit card as an authorized user to help build their credit (no matter your age you can still become an authorized user). Keep in mind, if you add someone to your account this only works positively for them if your credit is good, or the person’s account you are added to has good credit.
- Get at least one major credit card
One big mistake people do is getting a department store credit card first and letting salesman like myself trick you into opening an account (I mean I have to make my sales goals lol). I also fell into the trap at 17.DO NOT open a department store credit card first; department store credit cards are harder to get approved for if you’re starting out and often times have high interest rates. I recommend a major card for starters first like Capital One, Discover, or American Express. I recommend Capital One because they helped build my credit fast! If you are a college student or just starting to build your credit, try the Capital One Journey card. They typically approve anyone just starting to build their credit.
- Choose wisely
When choosing what credit card company to go with, choose a card with little to no APR% (Annual Percentage Rate) this keeps you from paying interest.
- Make good habits
Make sure you form good financial habits at the beginning. If you start good financial habits from the start you will carry them out. Here are a few good habits;
- Pay on time (your credit score will rise higher if you pay before your due date)
- Pay more than your minimum (If you’re scheduled to pay $25 pay $40)
- Keep your credit utilization low (use no more than 20% of your available credit, I try to use less than 10% but no more than 10%-15%) Ex. You have $2,000 available credit, only use about $200.
- Don’t open too many accounts (every time you open up a new account, or apply for an account you receive an inquiry on your credit. Too many inquiries are not a good thing, try to only have 2 inquiries MAX. per year) Note: Inquiries fall off in about 1-2 years.
- Keep accounts open (DO NOT close an account. When you close an account, it makes your credit history shorter and can affect your credit utilization and drop your score.