Finance Globe

U.S. financial and economic topics from several finance writers.
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5 Things to Know About Building Credit for the First Time

credit-report-calc-pen

Building credit for the first time can be both exciting and stressful. On the plus side, you’re ready to take this big step in your financial life. Conversely, you have some concerns about the moves you’re making and the short and long-term impact.

Here are five things to know about building credit for the first time:

1. It’s Every Bit as Important as it Sounds

Don’t talk yourself into thinking this isn’t important. Even if you don’t need a strong credit history and score right now, you probably will in the future when buying a vehicle, renting an apartment, or even signing a contract for a cell phone.

2. Your Credit History is Used for Many Things

Financial institutions review your credit history for many reasons. In addition to deciding whether to provide you with a loan, it also impacts the following:

•    Your annual percentage rate
•    Loan terms and conditions, such as the repayment period

The stronger your history and the better your score the more likely you are to secure favorable terms.

3. It doesn’t have to be Difficult

As difficult as it sounds, building credit for the first time can be simple. There are a few basic steps you can take to help your situation:

•    Pay your monthly student loan bill in full and on time
•    Obtain a credit card (either secured or unsecured)
•    Secure a loan with the help of a co-signer, such as a parent

It only takes a few steps in the right direction to build serious momentum.

4. It Takes Time

It would be nice if you could build a strong credit history and excellent score within a matter of months, but it’s going to take longer than that.

Slow and steady wins the race, so continue to make all the right decisions in regards to your finances. You’ll eventually end up in the place you want to be.

5. Track Your Progress

There are many ways of doing so, starting with an annual review of your credit report. This provides a clear overview of your credit, while giving you the opportunity to spot any errors that may be holding you down.

Also, request your credit score once a year. It’s your hope that your score increases year over year until it reaches the “excellent range” of 800+.

Final Thoughts

There’s nothing difficult about building credit for the first time. As long as you’re patient and follow your plan, you’ll eventually reach your goals.

What steps did you take to build your credit for the first time? How long did it take to reach your goals? What challenges did you face along the way?

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Monday, 16 September 2019

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