Tips For Building Credit

Building credit, especially good credit can take a lifetime to do. It’s hard to build it if you don’t already have it and then by the time you have it you probably don’t need it. Learning how to build credit can help build your future. It can help you qualify for loans when buying a home, a car, or even renting an apartment. Without credit these days it has become almost impossible to do anything. It is important to distinguish though, that you don’t just want to build credit, you want to build good credit. Here are some tips on how to do just that.

Tip #1: Secured Credit Cards
One way to start building your credit is by applying for a secured credit card. It is exactly what its name says it is; the money on the card is secured by the deposits you make onto the card. You choose the amount of deposit and that ends up being your credit limit. Why is this great for those just starting to build credit? Simply, because you don’t have the temptation of spending more money than you actually have. And anyone out there with a regular credit card knows that spending more than you have can get you into some serious debt and hurt your credit. Banks are more likely to give secured credit cards to those without any credit yet because they have little to almost no risk with them. If the money’s not on the card then you can’t make the purchase. The best thing about these cards is that credit bureaus can’t tell that they are secured credit cards. So when you make the purchases and pay off the balance you credit score will increase.

Tip #2: Use store credit
Many department stores will offer credit cards for individuals that shop at their stores. While they are not traditional credit cards they work in much the same manner. Instead of being able to make purchases anywhere like you would with a regular credit card, you can only make the purchases at that specific department store. They work the same as a regular credit card also in that if you keep the balance paid off or as low as possible it will definitely build good credit.

Tip #3: Start with one credit card
Many first time credit users accumulate several credit cards at once within the first few years of trying to establish credit. The thinking behind this is that the more credit cards you have the more credit you can build right? Wrong. It usually ends up that the more credit cards you have the more debt you have to pay off and the credit you build ends up being poor. Save yourself some trouble and only sign up for one card.

Tip #4: Charge only what you can afford
It can be difficult and exciting all at the same time. The worst thing you can do with a credit card is charge more than what you can afford. A good rule of thumb for first time credit users is to use it for groceries or gas. You’re pretty safe if you use it for that because you know that the money will be there for you to pay it off. Groceries and gas are usually two things that everyone budgets for. Charging more than you can afford can get you further into debt and hurt your credit scores.

Tip #5: Pay off your balance in full and on time
The best way to build credit and more importantly good credit is to pay off your balance every month on time. If you’re not charging more than what you can afford this should be easy to do. A large part of your credit score includes making payments on time and paying off your balance.

These are some great tips on how to build credit if you’re just starting out. Remember to always pay off the balance and to make your payments on time if you want to build good credit.