3 ways to build your credit if you're under 30
It's possible to be 22 and have a good credit score. And it won't take any risky maneuvers or shady deals to get there, just some financial savvy and a little bit of work. The benefits of having a great credit score from the beginning are numerous and can only help later in life. Things such as a new car, low APR credit cards or mortgages can all be adversely affected by a low or non-existent credit score, according to CreditCard.com. That is why, as "real life" nears, it is important to ensure that your credit score will work to your advantage in the future.
The economy is tough for those in their 20's, and fiscal struggles will only grow more difficult in the wake of a burdensomely low credit score, the credit card marketplace explained. Short credit histories and brief resumes are not something lenders look for in fiscally responsible prospects. This why it is important for you people to break through financial obstacles early in order to establish themselves as borrowers worth taking a risk on.
"The fact is that the young people are going to face a completely different world than we faced," Anamaria Lusardi, director of the Financial Literacy Center at Rand Corp, told CreditCards.com. "We are moving into a world of individual responsibility where people are going to be in charge of financial decisions that unfortunately have become very complex. Their financial security depends on them."
The key for young people to achieve a good credit score early is to establish beneficial habits that will lead toward more responsible fiscal decision making. A few ways in which someone under 30 establish good credit include:
1. Make sure you start building credit early
CreditCard.com mentions recent graduate, Scott Nguyen, 23, who decided before receiving his degree that establishing credit would be essential for his post-graduate plan. Ngyuen applied for his first credit card at 18, and from there he searched out simple ways to build credit for college students. He began investing in payments such as a secured personal loan and a small computer loan for students. He applied toward cards geared-toward students and build credit over time until the point when - upon graduation - Nguyen could apply for a mortgage if he desired.
2. Remember that creditors review more than just the timing of your payments
A great way to earn credit, once you have gotten yourself a card, is to spend much less than you earn. Scoring matrixes take into account not only payment punctuality, but credit card usage, according to U.S. News and World Report. This means even if you pay back your debts on a timely basis, if you're using a credit card to buy every stick of gum and cup of coffee you come across, that won't exactly reflect well. Companies determine your usage rate by taking your total balance and dividing it by your credit limit. Make sure you dole out your credit card usage sparingly, as this is a great way to ensure your credit score remains under control.
3. Look into alternative credit scores
Alternative credit scores work well for younger people because they take into account the payments that college students and 20-somethings are more likely to make than middle-aged homeowners. Alternative credit scorers such as PRBC take into account things such as rent payments, utility bills, cell phone bills and online services in order to build your credit score. Services may also come free, such as PRBC, and paint a more positive, and accurate, picture of one's credit history. So watch all the House of Cards you want - you're getting yourself a mortgage in the future.