After that crash course on the significance of a credit score, the next step would be to explore ways that you can start building up credit. Below you’ll find a six-point checklist that’s pretty easy to follow.
The first one is a must-do right away, while the rest you can work on as you go along and gain more experience in handling your own finances.
Get a part-time job
The size of a paycheck doesn’t influence your credit score. However, having some form of employment shows that you are reliable.
It demonstrates your ability to earn a steady income, part of which will go to paying bills and other pertinent financial obligations.
Creditors also look positively at people who’ve been with the same company for years. That said, look for a part-time job that provides opportunities for you to move up the corporate ladder.
Open a bank account
A good banking history leads to a strong financial foundation, which is a stepping stone for building a good credit score.
When you receive your first paycheck, use some of it to open your own bank account. Get accustomed to making regular deposits.
In this age of technology, you don’t even have to go to the bank’s actual location to open an account, as most offer online services that you can access via a computer or downloadable app on your phone.
Apart from a savings account, you may also want to look into opening a checking account. Just steer clear of overdrafts or declined debit card charges.
Become an authorized user
Ticking off the first two items on this checklist will surely earn you more than a few cookie points with mom and dad. Maybe enough to convince them to get you a credit card under their account.
Being added as an authorized user on a few credit cards with good standing will give you an instant credit boost.
Maintain a low credit balance
Low credit utilization is another important factor, as it accounts for 30% of your credit score. To expand on the explanation above, a higher utilization indicates you’re taking too much credit card debt and may have trouble paying it off.
Consequently, a lower utilization demonstrates that you are capable of handling your debts and the lender’s confidence in you will grow.
It is recommended to keep your credit card utilization under 30 percent, but it is best if it is under 10 percent.
Put your name on a household bill
Helping around the house could also mean pitching in for some of those household bills. Discuss with your parents about putting the cable bill or phone bill under your name and pay for it yourself.
Even if your parents continue to pay the bill, the fact that it is in your name will benefit you. Payments made under your name will not necessarily show up on your credit report, but they will aid in establishing a record of your payment history.
Pay bills on time
Now that you have a household bill to pay off monthly, make sure you always pay for it on time. The biggest factor in your credit score is how frequently you pay your bills on time.
Keep in mind that payment history accounts for 35% of your FICO Score. Make not missing a payment your number 1 goal as you go through this credit-building journey.
One way to remember your upcoming bills is to set due dates and reminders on your phone. Or better yet, schedule automatic payments from your checking account each month.
Stay on top of your credit
Monitoring your credit score is the best way to stay on top of your credit. Experian, a consumer credit reporting company, and many other similar services allow you to check your credit score for free by accessing it online.
Alternatively, you can check out tracking programs that your bank or credit card issuer might offer. See if any of these are available as an app. I personally check my credit score through the Chase App. It is simple, easy, and works great!
When you watch your score’s progress, you’ll be motivated to keep it moving higher. Regularly monitoring your score also lets you notice right away if and when there are discrepancies (e.g., a drop due to an accidental missed payment).
Have patience
Credit cards and credit scores may seem scary and complicated at first, because they are! It takes a while to get the hang of using them correctly.
When you’re first starting out, you may see your credit score jump around or not grow right away. This is okay.
Eventually, you will figure out what works for you. Check in periodically to see where you’re at and you might even surprise yourself from time to time with how much it has grown. It can be pretty exciting.
