Personal finance is a broad topic that can factor in an array of life aspects. Educating yourself on the importance of a savings account, how to write checks, and managing a budget are just the basics. Understanding your credit is another level. If you’re looking to finance anything in the near future such as a car or a house, your credit score will have an effect on your financing terms. For anyone looking to build their credit score, here are a few ways you can.
Your Credit History
Taking out a loan is borrowed money, and the lender you receive the loan from tracks how you pay that money back. How much money you’ve taken out and how well you manage your payments both go into your credit history. Employers, landlords, and other potential lenders will want to see a credit history before they approve your loan.
No Credit History?
If you’ve never taken out a loan before, you have no credit history. Credit history is a report of you making payments on borrowed money. With or without credit history, anyone can build their credit and achieve financial stability.
Get a Credit Card
A bank credit card with a small limit is the best way to gain and build your credit, especially if it’s from scratch. As a guideline, only spend up to 30% of your approved limit. Be sure to make your payments on time to avoid added charges. Check with your bank on the interest rates so that you can ensure your personal finance and credit card is under control.
Make Payments on Time
With any credit you take, whether that be a student loan or simply your credit card, you absolutely never want to miss a payment. Making payments will help or hinder your credit history. If you miss a payment, your credit may take a hit.
Have Variety of Credits
A variety of credits can help your credit score. You can have a mortgage, student loans, personal loans, car loans and other credit cards to give your credit a boost.
Store specific credit cards are only usable at that exact store. For example, Old Navy has a credit card approved customers can use and in return they’re offered rewards. On top of a store credit card, you can have a personal bank credit card. The most important thing to remember is that if you don’t pay off the balance each month, you will be charged interest.
Credit can seem daunting to those who aren’t informed. Follow the tips and tricks to understanding how credit works and boost your credit score in no time.