The Millennial's Guide to Building Your Credit
Get a Secured Card
The first step to building your credit is getting credit. Instead of getting a high interest loan, one should first look at a secured credit card. Secured cards are credit cards that anyone can get. It doesn’t matter if one has bad credit or even no credit. With a secured card, it takes a deposit to open an account. Once a deposit is made, you have access to a credit line that usually has a high interest rate. To build credit, start using the card and paying it off within the same payment cycle, so interest won’t be added. By doing this you can begin building credit
Pay Off All Debt
If one is currently in debt, paying it off can help you improve your credit score. Some debt like student loans doesn’t impact your score as much as personal loans or credit card debt. Paying off these high interest loans using the debt snowball method can help you get out of debt quickly by paying off high interest debt first. High interest rates can continue to accumulate causing even more issues and set you further from your goal. Once debt is paid off, the credit bureau will receive a report that you successfully paid off your debt. This can make a major change to your score.
Avoid Fast Cash and Title Loans
Many millennials go to title loan places when they need cash. If one doesn’t have credit, there is no other place that may be able to offer them a loan. A title loan doesn’t affect your credit score, but it can put you in a financial hole. Sometimes one will get a loan through a title loan establishment, pay it off, and see that it didn’t impact their score in any way. This is why it’s important to avoid these loans. They have high interest rates, hidden fees, and they can even take your car if you miss a payment.
Get a Credit Builder Loan
A credit builder loan is a specialized loan made for rebuilding your credit. If you have a low credit score, this might be the best option for you. If you have no credit score, a secured card is a more efficient choice. Getting a credit builder loan and making on time payments and practicing good credit building tips can help you get your score up. You might even be able to use this loan to pay off a higher interest rate debt and get a lower rate to save money. An important tip to remember is to make sure your loan payment can easily be afforded.
Keep Good Credit Habits
The best daily practice to get your credit score up and keep it up is to practice good credit building tips. Never take out more than you can afford when it comes to debt. A credit card is meant to hold you over until a paycheck arrives or if there is an emergency like a credit card bill. For smaller daily purchases, a debit card or cash should be used so you avoid overspending. It can be easy to get caught in debt, but thankfully with hard work one can get out of debt and get the credit score they deserve.