Building a rock solid credit history and staying out of debt go perfectly hand in hand. Many times the perception is that debt is not only a reality, but also a necessity in order to build credit. Technically there is some truth to this, but building an excellent credit history is more than just pumping up a numerical score without regard for any other well-rounded financial practices. Here's how to build credit history and stay out of debt at the same time.
Start With Credit in College
Building a credit history is much easier when starting off on the right foot early. The college years are the perfect time to not only sign up for checking and savings accounts, but also to apply for a first credit card. Student credit cards are usually much easier to qualify for than those intended for other demographic groups and building credit does require using credit. It's a natural fit, but only if used responsibly and not just to rack up a big balance without having an income to pay it off.
Pay Every Bill Early
Paying every bill early will not only prevent late fees and negative marks on the credit report for tardy payments, but also encourage a spirit of financial peace. Waiting until the last minute to pay bills often has an adverse effect on one's sanity. Paying early helps to reduce any chance of slow mail or other miscellaneous issues that can arise from that last minute mentality. And this does count for every single bill, not just credit cards - utility bills, phone bills, car loan payments, rent, house payments, and many other major expenditures all report on time payments to credit agencies.
Keep Balances Low
If getting out of debt all at once is an impossibility, it is still a good thing to do everything possible to keep any balances on credit cards or loans at less than a third of their maximum credit limit. Using too much of this percentage can have quite a negative effect towards building really excellent credit history. On the other hand, when there is no debt at all, making charges and then paying them off every month in full can also build credit history.
Watch Your Credit Reports
You could be doing everything just right, but erroneous or fraudulent details might still be showing up on your credit report, making all the effort a waste. As an important part of overall financial responsibility, checking credit reports on a regular basis is a must - especially with the increase of identity theft these days. Perfect credit can be literally destroyed overnight by fraudsters, but the good news is it can often be prevented or reversed by keeping a keen eye on the reports.
Again, it is very possible to build credit history and stay out of debt at the very same time - it just takes a little bit of extra effort!
Creating good credit and getting student credit cards is new territory for college students. Your future is starting now and you probably haven’t given much thought to building your credit. Getting off on the right foot is crucial for your financial future. Making the wrong moves can haunt you for years and you should be aware of the risks and rewards when it comes to your credit score.
Your credit score tells lenders if you are a low-risk person who manages their money and credit well, or if you are careless and reckless with your finances. If your credit is good, you’ll enjoy low interest rates on loans and credit cards, lower minimum payments than your peers and more lending options will be available to you. This can be very important when it comes to making major purchases such as vehicles or buying your first home. Making bad choices and careless uninformed decisions can lead to a life of high interest, high payments and simply not qualifying for that car or house that you need. The worse your credit gets, the more you pay for everything that needs financing. Trending in this direction can lead you on a downward spiral of out of control debt.
You may not know exactly where to start to ensure that you get the best deal and establish the best score possible. You are probably starting out with no credit score at all and applying for loans and credit cards can be disappointing when you are rejected again and again. Make wise choices. Don’t get a credit card just to go shopping or on a trip with your friends. Make sure that you really do have a necessity and don’t overcharge any more than you need.
When choosing a card, you may have some luck going through your bank or credit union, but there are companies that have special previsions for students. It is generally best to avoid companies that be preying on the fact that you seem naïve about credit cards. Beware of representatives that offer free t-shirts or any other types of prizes for filling out an application. That freebie could end up costing you hundreds or thousands of dollars in fees and interest in the long run. Look for good introductory rates that don’t balloon into something horrible after the promotion runs out. Compare interest rates, fees and terms of many cards before making a decision.
You may need to start out with a secured credit card. These are credit cards that require you to put money up front, use the card and prove that you are responsible enough to make payments on-time. Making on-time payments is one of the best pieces of advice you can get. Interest rates can fluctuate very quickly when a payment is missed. Fees are usually extremely high and you can get yourself into a bind that you can’t afford to get out of. Always pay more than the minimum required and pay off balances as quickly as possible. Show your responsibility to your credit card company and your credit score will reflect your diligence. Once you establish your good credit score, it will pay off for years to come.
Both Scott Stadler & Mary Wallace are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Scott Stadler has sinced written about articles on various topics from Credit Cards, Apply for Credit Card and Credit Cards. Compare the best at CollegeStudentCreditCards.net Also earn free flights with. Scott Stadler's top article generates over 14800 views. to your Favourites.
Mary Wallace has sinced written about articles on various topics from Credit Cards, Student Credit Cards and Credit Cards. About the Author: Mary Wallace, a retired teacher, is the editor for studentcreditcards.com, a provider of and information plus consolidation. Mary Wallace's top article generates over 1900 views. to your Favourites.