Credit Tips for Beginners

When beginning on your financial journey as an adult, it doesn’t take long to realize that credit makes the world go round. When you’re just starting out and you have no credit, you may find yourself having a hard time getting approved for a vehicle purchase, a home loan, or even something as simple as a cellular phone or rental apartment. Many find that having no credit is nearly as damaging as having bad credit! If you’re feeling discouraged by your lack of credit, rest assured there are some easy steps that you can take to begin building your credit to get ahead in the game.

Take Out a Loan

It may seem counterintuitive at first, but taking out a loan is a great way to build your credit, assuming that you’re responsible with your payments and due dates. Take out a small personal loan, your best bet may be through a major banking institution where you currently do your banking. This makes it easy for the bankers to see your employment history and your account history to determine your responsibility with money. Making regular payments on small loans is the fastest way to show you’re financially responsible and create a positive credit score.

Get a Credit Card

Again, creating small debts and paying them back on a regular basis is the fastest and most effective way to get on track with your credit. Take out one or two credit cards with low limits (consider student cards), and be sure to make payments that cover at least your minimum payments, though preferably more. The more often you pay off your credit card balance, the better your credit score will become. But beware! It only takes a few mistakes and missed payments to tarnish your hard work. Be vigilant with your spending and budgeting.

Check Your Limits and Spend Below Them

Even if your credit cards are being paid off monthly, it doesn’t look good if you’re constantly riding at the edge of your available funds. If you’re constantly maxing your cards out just in time to pay them down, consider spending lighter or increasing your limits. A constant habit of spending to the limits of your means is a warning sign for any potential lender. It’s also important to be careful that your limits are what you think they are, so as to avoid overspending unexpectedly.

This guest post is from Allison with CreditScore.net, where you can find more personal finance tips, no matter what your experience level.