Many young people falsely believe they have to either apply for a loan or carry a credit card balance to build a credit history. The myth is in thinking you must be paying interest to create credit. If you are just beginning in the credit world and want to generate a great score from the start, follow these simple steps.
The easiest way to start your credit history is through a credit card. Find one with no annual fees and the lowest interest rate available to you. If you are really early in developing credit, you probably won’t get a very high balance to start. But, if you act responsible and follow these directions that can quickly change.
No credit is FAR better than bad credit. Start off right and you can quickly develop a healthy credit history and report. The key is to be responsible and careful in your use of credit right off the bat.
With your first credit card, your goal will be to use it each month trying to keep your purchases to no more than 30 percent of your credit limit. Then, pay off the balance in full before the due date every month. This will avoid any interest payment. On your credit report, this average balance of only 30 percent of your limit will look outstanding and boost your credit score quickly.
Once you have had your credit card and used it regularly for a few months, request your free copy of your credit reports. This account should be listed there. If it is not, then you are not developing a history. If there is no activity listed, you should contact the bank who issued the credit card to find out why they are not reporting your account to all three major credit bureaus. If any credit you have is not reported, then you are not getting any reward for your responsible use of your account.
Keep this process up for your lifetime. Always using no more than 30% of your available limit and paying off the balance each month. Before you know it, you will have one of the best credit scores around!
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