Thursday, November 27, 2008

Start Building Credit NOW!

Your credit score is supremely important. You may not rely on it much now, but very soon it will be a deciding factor in everything from how easy it is to buy a home to whether you get a good job to what kind of rate you pay on a loan. Unfortunately, many young people behave irresponsibly without realizing the impact it will have. Here are the top rules for establishing credit while you are still young:

1. Get a credit card.

The only way to build credit, is to get some. Pick a card you trust and that has the features you want. You may also want to get a gas card and/or store credit card. These provide many benefits and are easy ways to boost your credit. Keep in mind, having more than one card can actually help your score. Just be sure to use them all responsibly (see below).

2. ALWAYS pay bills on time.

Even a single late payment will negatively impact your credit score. To keep yourself on track, use a calendar to track payments or even setup automatic bill-pay online.

3. Pay as much as you can.

Ideally, you should pay off the full balance on your credit card every month. This not only builds your credit, but protects you from getting yourself into debt.

4. Don’t use up your credit limit.

Sure, your new credit card may have a $7,500 spending limit, but using that amount is a recipe for disaster. In fact, top credit scores go to people who use less than 30% of their total credit allotment.

5. Get a co-signer.

A great way to build your credit is to attach yourself to someone with good credit history (like a parent or other relative). This works best with loans, but can also be a good option for your first credit card. Just be sure you are responsible or you could hurt your responsible signer’s credit score as well!

6. Apply for a loan.

Your credit score grows faster if you have several types of credit histories. So, in addition to getting a credit card, you should also get your name on a loan and pay it off regularly. You may already have loans (especially if you just finished college). If not, consider getting a small, low-interest, short-term loan.

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