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Starting and building your credit history comes with a plethora of benefits and advantages. It’s important because it determines the interest rates and options you have when trying to get loans. Why is interest rates important? It determines how much you pay over the base price of the car, house or loan you are getting. So good credit equal to low interest rates. Even better, there are really simple ways to pull this off! One awesome way is to start by getting a secure credit card. Another good option, you can also be an authorized user on a parent's credit card if they have good credit.
Often times I am asked, "when should I start establishing credit history?". The best time is when you have mastered the fundamentals of money management skills. Good money management skill include maintaining a budget and paying other bills, such as your cell phone bill - then it is time to begin. You can start without having a credit card. You can build your credit history with personal loans from a bank or credit union. If you want to go the credit card route, a secure credit card is a great option. Check out this video on how best to use a secure credit card here.
If you’re just starting off, keep in mind that it doesn’t take very long to establish good credit. The number of months can vary but it can be roughly 6 months. If you are trying to rebuild credit the timing is about the same. Tips that will help:
While you’re building your credit history, you should check your reports regularly. You can ensure that your creditors are reporting your payments to the credit bureaus by checking your credit report at all 3 bureaus at least twice a year at annualcreditreport.com. This is free right now and always free once a year. You are responsible for the accuracy of the data on your reports so be sure to check it and validate.
Another thing to think about while learning about credit history, be sure you are watching your credit score. When checking your score be sure but is your FICO score which is more commonly used by creditors and consumers. Please note, some of the commonly used apps that use a different credit scoring model that is called Vantage. Also, if you pay for utilities, use Experian boost for a bump up in your credit score.
As you are on your journey do yourself a favor and create and maintain a budget and stay away from late payments. For success, try secure credit cards, create and maintain a budget and pay bills on time. There are a few free resources such as budget sheets, a debt tracker and a coloring book for the kiddos here.
I have a couple of good books that includes the topics. It'$ My Money Vol1 is for ages 13-18 and It'$ my Money Vol2 is for ages 19-25. Both provide a ton of valuable information on money topics as well as credit.
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