When I was dating my husband, the topic of consolidated finances appeared. That was shortly after we graduated from college, I just moved into an apartment with him and a common friend.
He gave me a thoughtful look when I asked him for his credit score.
“I’m not sure,” he said. “I have never seen it.”
It turns out that there is nothing to find. After receiving generous funding from the late grandfather at the university, he spent a short adult life and paid everything in cash. He does not have a credit card, loan balance, or any other identifiable line of credit.
We took almost a year to bringup his credit rating to a considerable level, and I can happily report that our current scores are almost the same. Nevertheless, his story is still a warning story about what happens when you are not actively developing a good credit history.
Thankfully, even if you have not graduated from college, my husband’s situation can be easily avoided. You can start to build credibility among students by the following methods.
Let us find out how you can start to build your credit
Five ways to build your credit
Any child can become an authorized iser, if your parents use a credit card. In this way, you can use the card while the bank card is still responsible for payment.
With this strategy, you can “piggy-back” more established credit records from your parents. Payments made with this card will be copied into your credit report, allowing you to establish credit without any additional work. This is most effective for cards that have been open for many years and are in good standing.
Your parents don’t have to give you a copy of the card, or even tell you the card number. You can improve the credit history without purchasing anything.
You need to get permission from your parents to become an authorized user. Ensure your parents will pay the due on time and know their ’financial habits Otherwise you will also be affected.
Apply For a Secured Credit Card:
If you cannot become an authorized user, you can open your own card. Usually, the only option for people with limited credit history is a secure credit card.
Guarantee cards require a small amount of security deposit as collateral, usually between $ 49 and $ 200. This deposit will then become your credit limit, leaving you with little risk to yourself or the lender. Since the credit limit is very small, the security card is only suitable for moderate purchases.
How much you utilize of your credit limit you use has a great influence on the credit score. This is also known as credit usage, and a percentage of more than 30% will damage your credit score.
For example, the balance of a secured credit card with a limit of $ 100 cannot exceed $ 30. You should also pay off your balance in full on or before the due date.
The best way to maintain proper credit usage is to use the card only for small term bills like Netflix or Spotify subscriptions. Set up automatic standing instructions from your bank account to your security card so you don’t miss a payment.
Some secured credit card providers (such as Capital One and Discover) can check your credit score for free so you can monitor their progress.
Opt for Credit Builder Loan:
Credit builder loan is a loan product whose sole purpose is to improve your credit. It works as follows.
First, get a credit builder loan. The amount can be anything between $ 500 to $ 1,500. You will not receive funds immediately like a traditional loan. Instead, you start paying a small amount each month, which usually takes 12 to 24 months. At the end of the tenure, you will get the loan amount minus some fees which is usually less than $ 100.
In exchange, the company that provided the loan will report your monthly payment activity to all three credit bureaus. Just like using a security card, your credit score will increase, but the risk to yourself or the lender is small.
Loans that establish credit lines are a great choice for establishing student credit, because you don’t need any credit history to qualify. You need to be +18 to apply, have a SSN, be an US citizen or resident in the United States, and have a bank account or debit card.
Unlike most other forms of debt that a student may try to assume, the credit builder loan does not require a client. If you want to be financially independent from your parents, that is an important selling point.
Get Credit for Paying Rent:
If you do not want to borrow a loan from a credit builder or want to open a secured credit card, you can build credit through another method. Link your rent to your credit report.
However, this option requires registration and payment of third-party services to verify your rent payment and report it to the three credit bureaus.
Services such as Rental Kharma require a one-time activation fee, while other services such as RentTrack require a monthly fee of $ 9.95. If the terms of both of you are crumbling, some people ask the landlord to register in their system-bad news.
Pay Bills on Time:
Paying utility bills on time will not improve your credibility, but delaying payment will have the opposite effect. These late payments may be transferred to collection items, which will appear in your credit report and cause damage to them. Late payment on, cell phone bills and library fines can also damage your credit.
You can pay manually and set reminders in your phone or Google Calendar. Opt for a bill reminder system via text or email from your provider.
The automatic payments are supported by many companies. Which means that the bill will be automatically deducted from your bank account. This is the easiest option, but you should still check it twice a month to ensure that the payment has been passed.
When withdrawing money, please make sure you have enough cash in your bank account, otherwise you will overdraw the account. This will result in a refund of the payment and eventually additional costs.
Be sure to start when you are young and steadily build your credit.