How can young adults start building their credit?
Do you want to start building your credit but aren’t sure where to start? That’s okay. In fact, it’s very normal to be in this position. We’re going to go over some common questions people, especially young adults, often have about getting started on their credit journey.
What is credit and why is it important?
Credit is an arrangement that allows you to borrow money now, and then repay it at a later time. This borrowed money can be used to purchase things, such as a new car or your first home, when you need them. But, in order to get loan approval and better lending terms on these types of larger purchases, you’ll first want to establish good credit.
How do I get a good credit score?
First, you’ll want to understand what a credit score is. A credit score is a formula that many financial institutions use in order to determine your ability and willingness to faithfully pay back a loan and on time each month. Building good credit is a process that takes time, diligence, and patience. Let’s walk through some steps to get you on the right track for building good credit.
- Sign up for the right type of credit card
- Be consistent
- Set up automatic payments
- Pay your credit balances
- Remove any negative entries that are paid off from your report
In a previous article, An Education in Financial Matters, First Bank provides tips on how young adults can build good credit:
“After you’ve been using credit cards for a while and have been responsible with your payments, you should have a good enough history to apply for a personal loan. A small, personal loan would be a great start. These take some time but can build your credit score within six months to a year. Not only will this diversify the types of credit on your credit report, but it is another way that you can prove you consistently make your payments on time.”
Another great resource to read is, “Understanding Your Credit Report”.
I want to establish and improve my credit. How do I do it?
You might be early in your career, or you might be getting back on track. Either way, a Secured Mastercard® will point you in the right direction. When you keep making timely payments, you’ll soon see a nice jump in your credit rating and your financial fortunes.
Get started with establishing and improving your credit today with a Secured Mastercard®.
When you’re first starting out, banking terms, like credit and credit scores, can feel overwhelming. We’ve only touched on a few points and yet we realize there’s still so much more to learn. Be sure to visit our First Bank Financial Education Center for resources to help you. Also, feel free to contact us if you have any questions. We’d love to hear from you.