The Basics of Building Credit

How can I build good credit?

Credit cards stacked Building good credit is an important part of being an adult. Even if you never need to get a loan, you can use a good credit score to get discounts on phones, clothing, electronics, and more. There are several ways to build good credit, and one is no better than the others. You could…

– Make payments on a credit card.

– Make payments on a small loan.

– Make payments on a piece of furniture.

– Make payments on a house (not in rent).

You get the idea. Everything revolves around paying someone for something. In order to build credit, you have to find people that will trust you with a small amount of money. If you pay that back on time, you will get a good mark and a higher score.

It’s still like school.

Let’s go back to the idea of getting grades in class. If you turn in your assignments on time with the right information, you will get a good grade. Late or incomplete homework will not have as high of a grade. It works the same with credit. If you don’t make a payment on time or you make less of a payment than you need to, your credit score will not be as high. It’s as simple as that.

It takes credit to make credit.

Before you get excited about all of this, remember that you need credit to make credit. Sadly, most places that will help you build your credit want to see examples of your credit from the past. If you have no score to show them, you might not get the opportunity you need.

When you first try to build your credit score, you will need to get small credit cards and loans from companies that don’t look at past credit. These credit cards and loans will not be worth much, but they will give you a chance to get started. You may also get credit by paying on your household bills, like your cable, internet, electricity, and water. You will have to have those anyway, so they will help slowly improve your credit score.

You can also work with someone called a cosigner if you apply for a loan. This is a person that already has credit and is willing to put his or her name on a loan for you. By cosigning with you, this person is telling the bank that he or she will take over your payments if you stop making them. Your cosigner could be a parent, a grandparent, a friend, or anyone that you know with a steady income and a good credit score.