How to Build Your Credit as a Starter?


If you wish to unlock many financial opportunities in life, you need to have good credit right from the start. It takes time to build up a good credit score. However, it paves the way for various advantages like low-interest rates on car loans, credit cards, and other mortgages. In many cases, employers and landlords have been seen checking upon the credit reports of the candidate before even offering a job or approving of a residential application.

Where to start from and what steps to follow to build credit as a starterĀ 

To start building credit, you need to get credit. However, getting credit for the first time could be challenging, but it is not impossible. Here are steps for a starter to follow in order to build up his credit.

With a credit card:

  • Apply for a secured credit card that requires a certain amount of security deposit against the credit limit extended to you on approval. This amount gets refunded or adjusted later.
  • Get a retail store credit card which offers low credit limits but can be approved easily.
  • Request someone to make you an additional or authorized user. However, before doing so, make sure the primary cardholder is in good standing himself and has a good credit score.
  • You can get a cosigner, with good credit, for a loan or credit card. This would improve your possibilities of getting approved.
  • Always make your payments on time. Payment history plays a pivotal role in building up your credit score in the long run.
  • Opt for just one credit card to start with.
  • Act responsibly and borrow an amount that you can comfortably and affordably repay each month.
  • Try to pay your balances in full every month. In other words, always pay more than the minimum on credit cards.

Without a credit card:

Alternatively, good credit can be built without a credit card too. You can do so by:

  • Borrowing out a loan and repaying on time
  • The loan could be in the form of a mortgage, a car loan, student loan, or personal loan.
  • You can ask your parents for a hand by making you an authorised user on their rewards credit card or by co-signing for you when you apply for your first car loan or student loan.

Building credit responsibly:

Follow these thumb rules when beginning your credit journey

  • Avoid paying interest charges on your credit by paying off the entire amount every month
  • Make your payments on time, even if it is just the minimum amount that you can afford to pay. Late payments can wreck your credit reports for years.
  • Restrict your credit utilisation rate to 30% of the assigned total credit limit to you. This would improve the overall health of your credit in the long run.

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