Developing good credit is something of a conflicting
situation. With no credit card, it's difficult to build a good credit history.
However, with no credit history, you'll find it hard to get a credit card. This
leaves many people wondering how they're supposed to start building a good
credit score when nobody wants to give them a credit card. Luckily, it's not
very difficult once you know what to do.
Obtaining a Credit Card
The first step is always the hardest, and getting a credit
card is no different. Keep in mind that as someone with no credit history, your
options will be pretty limited and you'll have to do some research to find the
cards available to you. Your best option is to seek a secured credit card,
which may be available from many banks such as Primeway Federal Credit Union.
These cards come with a very low credit limit but present no risk to you. Once
you've been approved for the card, you'll have to pay a deposit that can span a
few hundred dollars. Should you choose to close the account eventually, you get
your deposit back. Secured credit basically means that you're lending yourself
money as opposed to getting it from a lender.
Pay Bills on Time
Keep in mind that 35 percent of your score is determined by
your payment history. Of course, this means that you'll want to focus on paying
all of your bills, even your utilities, on time and in full. Furthermore, more
recent payments will have the greatest impact on your overall credit score.
Avoid Too Much Debt
It's a popular misconception that all debt is good debt, but
this can get you into trouble. Around one-third of your score is determined by
how much debt you have, but having too high a debt to credit limit ratio can
hit your score where it hurts. Generally, you should try to keep your debt
within 30 percent of your total limit. It's okay to use your credit card on a
regular basis, but remember that it's not free money. Avoid using it for things
you can't afford.
Don't Be Hasty
Credit companies like customers who have long-standing
accounts and typically view them as more trustworthy. Once you open a credit
card account, avoid closing it unless absolutely necessary. The better the
average age of your account is, the higher your credit limit will become.
Building and maintaining good credit is a finely-tuned
balancing act. However, with a little responsibility and careful planning, you
can raise your credit score to a respectable level and make it easier to obtain
other lines of credit in the future.
In conclusion, building good credit can indeed feel like a daunting task, especially for those starting with no credit history. However, with the right approach and understanding of the key principles, it's entirely achievable. Secured credit cards offer a viable starting point for establishing credit, providing a low-risk option to demonstrate responsible financial behavior.
Consistently paying bills on time is crucial, as payment history significantly impacts credit scores. Additionally, maintaining a manageable level of debt and avoiding excessive credit card usage are essential practices to uphold financial health. It's vital to remember that credit cards are a tool, not free money, and should be used responsibly to avoid accumulating debt beyond one's means.
Furthermore, patience is key in the credit-building process. Long-standing accounts contribute positively to creditworthiness, highlighting the importance of maintaining accounts over time. By adopting prudent financial habits and managing credit responsibly, individuals can steadily improve their credit scores and pave the way for access to additional credit opportunities in the future.
Ultimately, building and maintaining good credit requires diligence, discipline, and a proactive approach to financial management. With perseverance and adherence to sound credit practices, individuals can establish a solid credit foundation and unlock various financial opportunities down the road.
