How to Establish Credit
Today, having an established credit history is extremely important when looking to purchase a home, apply for a new credit card, or even buy a car. You may be wondering, “Have I established enough credit to get a mortgage?” This is a common thing to wonder, and is a great question to ask!
The following are some easy ways to establish a credit history for yourself:
Pay Regular Expenses on a Credit Card
Having regular monthly expenses paid with a credit card helps you establish credit on a trade line. Just make sure you aren’t spending more than you can pay!
Become an Authorized User on a Family Member’s Credit Card
When a family member adds you as an authorized user to a credit card, the account impacts your credit report. Therefore, if your family member pays their bills on time and in full each month, then it will have a positive impact on your credit score and credit history.
Get a Department Store Card
Signing up for a department store credit card can help you build credit as you can incur expenses and pay the bill off monthly.
What Does Your Credit Score Start At?
Every single person, at some point, starts with no credit. Therefore, it’s reasonable to wonder what your score begins when you establish credit. Many often think that you start at zero; however, your credit score can never be zero. Typically, most people start with a credit score of 300.
How to Build up Credit
Once you establish some credit for yourself, it’s time to start building up your credit! You want to focus on healthy credit habits to maintain and improve your credit score over time. Here are a few ways to build up credit:
Pay your bills on time
Paying your bills on time is a great way to start building up your credit, as well as maintaining or improving a credit score. Paying your bills on time shows that you are spending and managing your expenses responsibly.
Pay your bills in full
Try to pay all of your monthly bills in full to show healthy, consistent repayment habits.
Make sure you are only spending what you can afford.
Of course, you should aim to spend less than 50% of your credit limit each month. Additionally, only spend what you can afford each month. Some months, you may incur more expenses than others, so you should plan your monthly budget accordingly to avoid potentially paying a credit card bill late and negatively impacting your credit score.
Try to keep your accounts open
Credit typically gets stronger with age. Try to keep your accounts open for a long time, even if you are not consistently using the credit card. Also, if you aren’t actively using the card, it won’t hurt your credit by keeping it open.