Establishing a good credit history has never been as important as it is today.
It's not just that you'll need good credit to get decent rates when you're ready to buy a home or a car. Your credit history can determine whether you get a good job, a decent apartment, a deal on your cell phone and reasonable rates on insurance. One seemingly minor misstep -- a late payment, maxing out your credit cards -- can haunt you for years.
If you're just starting out, you have a once-in-a-lifetime opportunity to build a credit history the right way.
Here's what to do and what to avoid.Check your credit report
You'll first want to see what, if anything, lenders are saying about you.
Establish checking and savings accounts
- Whether you pay your bills on time.
- How much of your available credit you actually use.
Piggyback on someone else's good credit
Apply for credit while you're a college student
Apply for a secured credit card
- Have no application fee and a low annual fee
- Convert to a regular, unsecured credit card after 12 to 18 months of on-time payments
- Be reported to all three credit bureaus.
Get a store card
Get an installment loan
Use revolving accounts lightly but regularly
Just remember these credit tips and you should be well on the path to building a solid credit foundation.
- Don't charge more than 30% of the card's limit.
- Don't charge more than you can pay off in a month. You don't have to pay interest on a credit card to get good credit scores. It's much smarter to pay off your credit cards in full each month.
- Make sure you pay the bill, and all your other bills, on time.