How to Build Credit: Planning and Patience
Building credit can be a snap, but it takes time and can be done wrong
If you have no credit history, then building one is a great idea. Having access to credit can help you out when you are facing a temporary shortfall in income, are between jobs, or just want to have the safety of knowing you can borrow if you need cash. Building credit is not difficult, but it can be mismanaged, and if you run into trouble with your first credit card then your credit will suffer for years. Managing your finances is key to building credit, so a professional financial guidance provider like HelloWallet can help you insure your credit gets off to a good start.
The best way to build credit is simply apply for a credit card and use it. Instead of paying in cash or using your debit card, make purchases with your credit card. Be aware that it is very easy to overspend using a credit card so keep track of your purchases; you will only build credit if you pay your balance back on time every month.
Missed payments will establish you as a late payer, and your credit report will reflect this for a long time. One way to keep on top of payments is by using HelloWallet’s budget planning service and breaking up your spending into categories like Groceries, Travel Expenses, etc. We can keep track of your spending and alert you if your purchases in any of these categories exceed your monthly limits.
Secured loans and credit cards are an additional way to build credit, but these are slightly more expensive than traditional loans or cards because you have to put money down. By open an account valued at some percentage of your loan or credit limit to the bank, they are satisfied that if you don’t make payments they can simply take money out of your account. This is more expensive since you have to put money down, but if you can’t get approved any other way this might be worth the cost.
If you don’t qualify for a credit card there is a very easy solution, provided you have friends: borrow someone else’s credit! If you don’t have a credit history but your parents or a relative or good friend does, they can cosign a credit card with you. Since they have an established credit history they are essentially guaranteeing you for the credit card company. You can get a card this way and build credit, but be careful, if you miss payments you won’t just be hurting your credit, but also your cosigner’s.
Successful credit building comes from successful financial management. Don’t take the risk of mismanaging this crucial phase of your financial life. Let HelloWallet help you to a future of good credit and wealth!
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