Credit is an extremely important thing for a financially mature adult to have. It allows you to get loans for homes and cars and rent apartments. Bad credit can increase the amount of interest you pay. People who have no credit or bad credit may struggle to get their credit to be pristine, but this guide can help make their credit score skyrocket.
[Read: 7 ways to create and improve personal credit score]
Check your Credit
Even if somebody has never used a credit card in your life, credit bureaus may have information that they have used to create a credit score. If they have had a credit card, they certainly do. There are free credit report services that can give a person their credit score. In America, there are three free credit-reporting services, so people can check their credit report three times a year by cycling between them. These services may also offer more frequent credit reports for a fee. You may find that you have a purchase that is misfiled under your name or a lingering piece of debt you forgot about. Make a habit to check your credit score regularly. In the modern financial word, the credit score forms a ladder to great purchases.
Choose Cards Carefully
Different credit cards have different options, and while signing up for the first one you see may look appealing, it may not be the best for the long term. Do some heavy-duty comparisons between choosing a card. Figure out what kind of benefits you want from your card. Some allow cardholders to earn travel rewards points, while others have no annual fee. If a person is getting their first card and establishing stellar credit, they should consider getting something with a low maximum credit so they don’t accidentally spend a lot of money at once. Be sure to read the fine print. A card that starts out with a 1% interest rate for the first six months might jump up to 12% once the grace period is over.
Work up Slowly
Getting a credit card can be difficult if you have bad credit. In that case, a secured credit card may be the best option. Secured credit cards help to establish stellar credit by having cardholders make a cash deposit before you use the card. They still have to pay every month, but they have a cushion in case they cannot pay. Another option to get a better credit score is to take out a small loan with a credit bureau and pay it back as soon as you can. The loan can be as small as $100.
Pay on Time
Always make sure the bills get paid on time. Credit reporting companies track the bills that are in your name, and if they see you are falling behind, they will count that against you. If you want to establish stellar credit, paying your bills is a good way to do that. It shows that you are a dependable, reliable person. Late payments will accrue interest, meaning you will pay more if you do not pay right away. In the digital age, there are more ways to remind yourself to pay your bills than ever before, and it’s good for your wallet and your credit score.
Mind Your Balance
Paying your creditor back is more difficult if you have a high balance. Moderate your credit card usage so you keep your balance low and pay less at the end of the month. If you have interest, know that the money you send will go to the interest before it goes to the original payment.
Keeping an eye on your balance will also inform you if somebody is using your credit card without your permission. That someone could be a scammer who stole your information or a ten year old who entered your credit card randomly when making an online purchase. Someone other than you making purchases on your account can destroy your credit score. If you find a purchase you did not make, contact your credit card provider right away. They have people that can help you resolve the issue.
[Read: Saying Goodbye To Old Credit Lines]
Establishing stellar credit takes a long time. There are times when you may be tired, upset, or stressed and want a simple solution. You could just give in and use your credit card rashly just one time. Resist that urge. The thrill you get from buying something you can’t actually pay for will crash down hard when you get the bill. One bad purchase could start an avalanche of problematic purchases that drags your credit score down. If you keep focused on the things you will be able to do once you have a good credit rating, you can overcome all of those tempting purchases. When you need that credit, you will thank yourself for being so diligent.