Before now, building your credit history used to be very difficult, and young people were not able to borrow money easily due to insufficient credit history.
Since younger ones were not allowed to borrow, building a credit history by such means was extremely difficult because of the likelihood of financial mismanagement. Creating a strong credit history is the hallmark of financial freedom for most people.
Nowadays, there many tricks and techniques young ones can use to accelerate their credit scores, but it still boils down to being responsible for financial matters and lifestyle. Growing up comes with lots of financial responsibility and gains too.
Now, the rules have changed dramatically; young people find it easy to accumulate credit scores as the need arise. With the advent of credit card companies, young people now have equal access to a credit account as long as they can provide a valid name. Young people still need to understand how to build their credit rating and history over time.
There are important guidelines that can save you from stress if you adhere to some financial rules about credit. Building good credit is a huge bonus, as it would help you qualify for loans, cell phone plans, auto insurance, and rental applications. One mistake most people make at the onset is applying for too many credit accounts.
A potential lender will always check up on your existing record whenever you requested for credit. If your record shows no history of credit but rather several applications made for different credit accounts, it shows that you might be in financial trouble and just sourcing for funds to increase your debts, so the lender may not approve it.
Deciding on the loan amount
Deciding on the specific amount of credit you will need on a monthly basis should be the next thing after you have successfully applied and gotten the necessary approval from a credit company. Ensure it is a reasonable amount that you can afford to pay easily; you can then deposit the said amount into the bank as collateral. Although this is not a required step, it will increase your chances of acceptance by credit companies. You need to focus on building your credit rating as soon as you receive your credit card.
However, in order to boost your credit score quickly, you will need to avoid borrowing above 30% of your credit limit and ensure you make payments as soon as they are due. If you exceed more than 30% of your credit limit, it can reduce your credit score, and another important thing is that most lenders are always interested in your paying habits, to know if you always keep to time and if there are any defaults on your profile so far.
Getting a credit card
A credit card can directly influence your credit score depending on how you use it. A regular and responsible use can boost your score. It is advised that you regard your credit card as a debit card and always spend what you are sure you can pay in full. Keeping a budget can also help you to control your spending habits whether you own a credit card or not.
Note that each time you open a new account or close an old one, it lowers the average age of your credit accounts, and this can affect your credit score.
In addition, keep in mind that credit companies are in the business of lending money to make profits too. If you establish the habit of paying your bills out rightly, the credit card companies make no money off you, because the transaction will generate no interest charge on your account.
To boost your credit score continuously, you should borrow money and pay it all once a month. If you maintain such habits over a long period, you will see your credit score increase drastically.
If you are new to credit card usage or you have made an unwise use of your credit card in the past, or probably some mistakes that you find very difficult to correct, it is not too late as you can still make amends and see positive results.
However, it is unlikely that you will get the best results. Being rejected for a loan or rent apartments can be disappointing. In addition, each time you apply for a new credit card, the issuer is likely going to check your credit profile, and this can take away some valid points from your score.
If you were issued a credit card recently, remember that you cannot build a good history overnight, even if you exercise all the financial cautions on earth. It takes about three to six months of real activity before a credit score can be derived from your credit records. Whether your goal is to own your house, plan a vacation, or sponsor an education, everything can be achieved with adequate planning, discipline, and commitment.
Setting goals helps you to stay focused and ensure you do not lose track or wallow in the stream of unnecessary spending and extravagant lifestyle because you now have access to credit.