Anyone who is entering the workforce will need to seriously consider the way they handle their money management by being cognizant and intentional about where it is going. Doing so will ensure you’ll never run into issues with transactions such as obtaining a mortgage OR even securing an apartment.
While there are a very small percentage of the population that may never actually use OR need a credit score (the very wealthy or those who don't use money) – the rest of us will need our credit history to back us up in many large purchases and loans.
Anyone who is entering the workforce will need to seriously consider the way they handle their money by being cognizant and intentional about where it is going. Doing so will ensure you'll never run into issues with transactions such as obtaining a mortgage OR even securing an apartment.
I'm just out of college – how should I build my credit?
After I finished college, I had mixed thoughts about credit cards. I heard everything from they are “evil” to the fact they can be very useful. My naivete didn't last long as I had soon secured a credit card and I was on my way. I didn't use the card a lot – until I ran into some financial troubles after getting laid off from my full-time job. Pretty soon I was charging everything and anything on it – taking out cash advances and even opening up other lines of credit.
Fortunately, I was able to “wise-up” and get a handle on my situation. But I never have forgotten the lessons from those days: credit can be a self-inflicting weapon if not handled responsibly.
It's really important to get yourself in a right frame of mind when it comes to money. You may be very fortunate after leaving school that you land a very lucrative job. Making sure that you think rightly about money and credit will ensure that you are a path to financial freedom and not one of financial burden.
Answering the following questions honestly will help you evaluate how you may handle money – and credit – in the future:
- Do I spend money to impress others?
- Is “success” at any cost worth going into debt?
- How would I handle a large windfall of money?
- Do I respect money OR do I view it as something that “comes and goes”?
While you may have answered these questions with positive intent – you will probably not know exactly how you'll react until you are presented with a “windfall of money” or are socially pressured to “keep up with the Jones'”. But being enlightened about your money “issues” you'll be well prepared to treat money and credit responsibly.
To start building your credit – you will want to obtain a “no credit, credit card”. CardHub.com lists several credit cards for people that are new to credit. Take a look at these and research them on your own. They are specifically designed for folks with no credit history. If you attempt to apply for other cards (geared towards those with credit history), you'll likely get declined.
Perhaps your parents co-signed a student loan or a car loan with you. Making sure that you are current and make faithful payments will also aid in building your credit. This will be the case with any credit-related product: paying it off in full every month or being faithful on the monthly payoff amount will build a positive credit profile of you over time. Try not to skip a payment, be late or pay less than the “minimum amount”.
Also, check out CardHub's list of secured credit cards. These are also beneficial in building credit, but require a deposit down before opening the line of credit. Typically you'll need to put down at least $200 on these but you can get a refund of this amount when the account is closed – in good standing. Also, the amount of your deposit is generally your credit limit (the amount you can “charge” on the card).
As I've stated – the important factor in building credit is just being faithful with all of your payments. Do that – and you will build a credit history that will serve you for years down the road.
Are there other ways you have found to build credit?