Establishing good credit in your early 20s can be one of the best things you do for yourself financially – or by any other standard, for that matter. When you have a good credit score, opportunities will open up for you, starting off your adulthood on the right foot. The ramifications of good and bad scores will begin to show themselves in more defined ways as you begin making increasingly more important financial decisions. From lower interest rate mortgages to a credit card with cash back rewards, having a good score will help you profit in the long run. Also, the information you learn along the way will much more likely to keep you from bankruptcy!
This article will cover some of the basics on how to establish good credit at an early age. While everyone's financial situation is unique, the guidelines in this article are written to be just that: guidelines . Never try to take credit you can't afford in order to boost a credit score. The risk is too great, and the results can be harmful to your credit score.
Establishing a Great Credit Score:
- Avoid student loans if at all possible. While loans may be unavoidable for many students, staying clear of loans will help boost your score.
- Stop using your debit card, and start using a credit card as if it's debit. When you use a debit card you do absolutely nothing to enhance your score. Using a credit card in a responsible way, conscious of what is actually in your checking account, is an easy and effective way to help establish a great score. If you don't trust yourself, ask your bank about obtaining a secured credit card.
- Look into getting an installment loan. Next to having and using a credit card, getting an installment loan and paying it back can be an extremely effective way to establish great credit. This option might cost you a little in interest though, which makes a free credit card more appealing for many. But, if you are desperate to bump your score now, installment loans can be great options.
- Don't rack up lots of charges on your credit cards. Even if you pay them off, the credit bureaus don't like to see a small gap between your credit usage and your credit limit. The wider the gap, the better!
Establishing a great score at a young age doesn't have to be difficult. Utilizing some or all of these suggestions can help you get a fantastic score that will make life down the road a little bit easier. When it comes time to getting a mortgage and putting your first down payment on a house, having a great score will secure you a much better interest rate. Also, proper usage and understanding of credit makes the likelihood you will end up in bankruptcy far less probable.