It’s estimated that more than 43.4 million Americans have poor credit, which is just over a quarter of the population. A poor credit score is defined as one that’s 599 or under.
There is a wide array of factors that have led to these poor credit ratings, with many attributing the problem to excessive spending, bad loans, “hard times,” and other similar issues. Another issue that has contributed to this epidemic is the fact that many young people aren’t taught how to properly manage and budget their money.
To help ensure you don’t join the masses and obtain a poor credit rating too, use the finance tips found here.
1. Sign Up for Automatic Payments
If you are trying to build your credit, one of the worst things you can do is have late payments. It’s absolutely essential you make all of your payments on time, and that you pay the full amount due.
Rather than leaving this to chance, set up automatic payments. This will help ensure you never forget to pay something.
2. Become an Authorized User on Your Parent’s Account
If you are planning to go to college, the best credit card you can have is one in your parent’s name. When you are an authorized user on your parent’s account, it can actually help you build good credit.
This is done by “piggybacking,” which is allowed among family members. With piggybacking, if your parent has a good credit rating, yours is going to receive a boost, too. This also reduces that risks that go along with you having your own credit card since your parents can monitor what you are spending.
3. Obtain a Credit Card with a Low Limit
When searching for the best credit cards, remember, it isn’t always going to be the ones that give you the highest spending limit. For some people, this may actually be risky, as they could be tempted to spend that much.
A better option is to find a card that will start you off with a lower limit. This allows you to charge smaller items to your card and then pay it off – in full – each month. This can help you quickly build your credit.
4. Avoid Big-Ticket Purchases – Except in Cases of an Emergency
There’s no question that the right credit card can be an invaluable financial tool. However, you have to manage your card responsibly if you want to benefit from this tool.
If you keep your debt levels low, it will ensure that if you face some type of emergency, you are still going to have plenty of your credit line to use. This means if your cellphone fails or a tire blows out, you can purchase what you need, without putting yourself in a financial bind.
5. Establish Good Financial Behaviors
If you want to build a strong credit record, then it’s imperative that you fully understand how the credit bureaus work. Credit card debt is a huge factor in your credit score.
While this is true, you should not ignore common sense or sound financial advice just in the hopes of building better credit. If you have developed proper financial behaviors, then your credit score is going to reflect this.
6. Pay Your Balance Off Every Month
When you are first starting to build good credit, you need to do everything you can not to keep a balance on the card. Only use the card you have for items you can actually afford.
By doing this, you can pay off your balance at the end of each month. If you can’t do this, then you are living beyond your means.
In this case, you should not be making the purchases, to begin with.
Remember you should only get a credit card if you have a job or some source of income to pay off the things you charge. If you carry a balance on your card, you are going to have to pay interest fees, too.
7. Take Things Slow
Building credit isn’t a race. You need to do this judiciously and slowly.
Create a budget, and when you need to purchase something expensive, make sure you include it in your budget. This is going to let you know if the payment will work with your established budget.
Never outspend your income. This is the best way to get in financial trouble and spend more than you make.
8. Don’t Co-Sign for Your Friends
If you are under the age of 21, you may have to have an adult co-signer to be approved for a card. The same is true for your friends.
You may have some friends to ask you to open a joint account with them. In no situation is this a good idea.
If your friend ever slips up, and they take on too much debt or if they miss payments, then the co-signer may wind up having their own credit take a hit.
Finance Tips that Make Sense
If you are ready to begin building your credit, and help ensure you maintain good credit, then the finance tips here will help you do this. Be sure to take things slow and know what you should – and should not do – when it comes to your credit.
If the information shared above is beneficial, then it is a good idea to take a look at some of our other blogs. For example, we offer a blog explaining seven tips to improve employee productivity.
Our goal is to provide our readers with quality, accurate information that can help them grow and succeed in life and their career.