How To Build Credit As A New Adult
So, you have finally turned 18 and are starting to learn how to be an adult. Part of being a successful adult is, of course, learning to deal with your finances. As you have probably discovered though, you are starting at “0”. You have absolutely no credit history and as such, your credit rating is very low. This will make it hard to do things like get a car loan.
Building Your Credit
Everybody has to start at the bottom so don’t dismay. Here are things that you should start doing to build your credit rating.
Get A Gas Credit Card
Probably one of the easiest unsecured credit accounts to get is a gas card. Apply for one at a station that you use often and you will probably also get some perks like money off of gasoline for a set amount of time. Be sure to keep your account balance under 30 percent and in a few months, you should see an increase in your credit rating as you show some reliability.
Get A Major Credit Card
After several months with your gas card, you should start seeing an increase in your credit rating. Now you can apply for an unsecured credit card from one of the major providers. This is a great tool to have in cases where you need some emergency money. Banks like Capital One are particularly willing to work with people with less credit history so it would be a good idea to start with them. Once you get your card, once again, keep your balance under 30 percent. Do not get carried away with your new spending power. Pay your bills on time and you will often see a small credit increase after about 2 to 3 billing cycles.
Apply For An Auto Loan
By now, you should have established enough credit to get an auto loan. It will not qualify you for the best rate but you will be able to get approved for a secured loan. Auto loans are secured since the vehicle itself becomes the collateral. After you take out your loan, you will need to once again pay your bills on time. I know this is obvious but the biggest factor in your credit score is making on time payments. Keep paying on your loan for 3-6 months and move on to the next step.
Refinance Your Auto Loan
After paying on your loan for 3-6 months, you will have built u some good history and can start using that to get yourself a better rate. Now is the time to refinance your vehicle and get that interest rate down. It will also pay off your old loan and open a new one, helping you build history. The best thing about refinancing an auto loan is that it is simple and free. You can do just about everything online and the company refinancing the loan does almost all of the work.
Your New Credit
By now, you should have some decent credit. The only thing left to do is stay on the course. Keep your balances low and keep paying your bills on time. After a few years, you will be ready for that next all important step. Your first mortgage. To some of you, it might sound like a big commitment but a home that you own will help you start to build wealth. It is a very important step.