Build a Strong Foundation First?
It’s not easy to build credit history from scratch. It can be even harder if you’re a young adult, especially if you’re under the age of twenty one. It can still be done and should be done the right way so you can establish a rock solid credit score to secure your future financial well being.
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A good credit score is the key to your financial well being and will determine how much extra money you will have to spend to buy something on credit or apply for a loan. The worse your credit history is, the higher interest rates you will pay, if you’re approved at all.
Lending institutions and creditors look at your credit history to make a decision on whether to loan you money or give you a credit card. If you have no credit history, there is no record on how you will manage or pay back your debt. As a result, many lenders and creditors will not take a chance and lend you money or offer you any kind of credit.
It’s much easier to build and maintain good credit history from scratch than to start off with bad credit and try to repair it later. Anything reported to your credit bureau will be on it for anywhere from seven to ten years.
The Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009 has made it even harder for young people to get credit cards. Back in the old days. Credit card companies used to set up shop at colleges across the nation and offer new college students little perks to get a credit card with them.
Companies are not allowed to do that anymore. Credit card companies are prohibited from that kind of marketing. If you are under twenty one, you must show proof of sufficient income or assets to get a credit card.
No matter how old you are. If you want to build a solid foundation to build your credit score, follow these tips.
The first option is to become an authorized user on one or two of your parents existing credit card accounts (as long as they have good credit).
Once you’re eighteen, ask your parents to add you as an authorized user. Tell them you don’t want a card, you just want to start establishing a solid credit history. They don’t have to worry about you charging anything and you still get the good credit history as long as they are making timely payments.
Although your credit bureau will show that you’re an authorized user on the account, this is a good way to give your credit a boost. Most lenders will see that you’re not really the one with the credit however some lenders may overlook the fact you’re only an authorized user on the account.
Once you establish your own credit history it’s a good idea to have your parents remove you from their accounts. You will want them to do this anyway in case anything negative were to happen to their accounts so it does not affect your history.
Apply for small lines of credit before moving on to larger lines such as a car loan and mortgage. This will keep you from spending unnecessary amounts of money on interest and bank fees and build a solid foundation.
