If you’re in your 20s or 30s, it can be hard to build a credit history. But once you have one built up, it will be much easier to get loans and other financial products as you age.
Open a credit card
With a credit card, you can track your spending and build a good payment history. A great way to start is by applying for a credit card that doesn’t have fees. Another option is using one of the many no-fee credit cards offered by major banks, like Capital One or Discover. These cards are great because they offer rewards programs and cashback without any annual fee! Paying a good interest rate for car loan won’t be an issue then.
Apply for a small loan
If you are ready to take the next step in building your credit history, then apply for a small loan. A credit card is not as easy to get as it once was, and that’s good news if you’re just starting out. Credit card companies want to see that you can pay your bills on time, so they’ll be more likely to approve your application if they know it won’t be riskier than they like.
Find a cosigner for a loan or credit card
Having a cosigner on your loan or credit card can help you build your credit history. A cosigner is someone who agrees to be liable for the debt if you don’t pay it back. Typically, parents or relatives are willing to act as cosigners because they want to help their loved ones start building their own financial history.
Keep your credit utilization ratio low
Your credit utilization ratio is the amount you owe on your credit cards, divided by the total amount of available credit that you have on those cards. This can be a good indicator of how healthy your overall financial situation is, as well as an indication of how likely it is that you’ll pay off those debts on time.
Stay current on all accounts
To build a strong credit history, you should avoid closing accounts and keep the balance on your credit card low. You may want to apply for new credit cards, but this is not advised because it can lower your average age of accounts.
You should also avoid opening too many new accounts or applying for too many loans at once. The best way to build your credit history is by paying bills on time and keeping the balance low on all of your open accounts.
Monitor your credit score and report
Monitoring your credit score and report is one of the most important things you can do to help build your credit history. It’s also a simple thing you can do. You should make sure that you check your credit report at least once a year and get it from each of the three major credit bureaus: TransUnion, Experian and Equifax.
Financial experts like Lantern by SoFi believe, ”Your score helps lenders assess how risky it is to loan you money.”
If you follow these steps and maintain a good credit score, you’ll be well on your way to building a strong credit history. Keep in mind that it can take some time for the effects of your efforts to show up, so don’t get discouraged if things don’t happen overnight!