Having an excellent credit score is a bit like having access to an essential facility. Sure, you might be able to get by without it for a while, but ultimately, you'd still have to get it because, without it, life would be quite difficult. However, it does mean you’ll have to get into a bit of debt before you can reap its benefits.
The good news is a strong FICO score can be the key to getting important things you might not be able to get otherwise like loans, mortgages and even employment. So, when should you start building your credit scores? Well, as early as possible. Some parents typically start building for their kids when they are teenagers and then hand everything over to them when they get into college. However, if you want to start doing so as a young adult, here's how to go about it:
Don’t Take on More Than Two Credit Cards
The first thing you need to do when you want to start building your credit score is to apply for a credit card. Here's the thing about credit cards: they are extremely tempting to use. Moreover, you can soon get carried away with all the good things you can buy with it. However, you know what the downside is?
If you do not make your minimum monthly payments, you will soon find yourself in a sea of debt. So, start with just one credit card – two at the most – and use them for tiny payments. The first step to building your credit scores is to make your card payments every month. So, put only those things you know won’t be difficult for you to pay back on the cards.
Ask the Bank to Place a Limit on Your Cards
It is simple really. All you need to do is to tell the bank not to raise your credit limits automatically. There's always the temptation to go all gung-ho on the cards – what young adult would not be tempted when he has a card that has a limit of $5,000 on it? So, inform them to limit the card to no more than $500-$1,000. This way, you still have enough to cover and meet your needs and will be able to pay the funds back promptly when the bills come in.
Pay Off the Full Balance Every Month
As long as your spending is within the stated card limits every month, paying off the balance should be an easy task. So, take care of that without fail every month. Doing this for just a few months can raise your credit scores and put you in the government’s good books and portrays you as a financially responsible citizen.
Resist Any Free offers With Your Credit Card
On signing up for your credit card, you'll get a few free offers. Whatever you do, do not fall for these. The same goes for any other offer you get with credit cards. Most card issuing companies do this to entice you into signing up for their cards and many people routinely fall for this ploy by thinking they'll cancel as soon as they get it. This is a terrible idea because there will be a history of canceled cards in your credit history. Having too many card cancellations will most assuredly impact your credit scores as the credit bureau will consider you a big risk.
Go For Prepaid Credit Cards
You might also want to choose prepaid credit cards. These are easy to because all you'll have on the card is the amount you loaded on the card. Does this mean that you can spend it all? Not at all. The same rules still apply. However, using a prepaid card is an excellent way to teach yourself financial discipline. Doing this over the course of a few months will help you better manage the credit cards when you eventually apply for them. About the author:
Oscar King works as a financial planner in Fort Lauderdale, FL, and to help supplement his income he writes articles to help spread financial advice to those who need it. Sometimes, the best option is to file bankruptcy through an attorney, and to exercise this option he highly recommends consulting with Attorney Peggy-Cruz Townsend. You can learn more about Oscar by visiting his Google+.