What you should consider when building good credit from scratch What you should consider when building good credit from scratch

What you should consider when building good credit from scratch

A good credit score will open many doors for you, whether it’s for low-interest loan rates or specific credit cards. If you’re careful and dedicate, you can build good credit in less than a year.

Do you know what affects your credit score? Don’t fall for any of these credit score myths! There are actually many different factors included, each of them with a certain level of importance. First, there’s the credit used and the number of inquiries and new accounts. They each make 10% of the score’s total. Next, there’s your credit history with 15% and the amount of money that you owe, which accounts for 30% of your credit score. The 35% that's left belongs to your payment history.

If you’re a complete beginner, avoid opening many credit card accounts. Each one of them equals an inquiry to your credit report which, as you can see above, adds up to 10% of your score. Only having one credit card also gives you a clearer idea of what you can spend, and it’s less tempting than having your wallet filled with cards.

You can apply for a retail store credit card instead of a major one. They usually have fewer requirements and won’t mind as much your lack of credit history. Their lower credit limits will also avoid the temptation to overspend. You’ll even enjoy their coupons or sales!

A way to increase the possibilities to get approved for a credit card is to apply with someone else. If your co-signer has a good credit history, it’ll benefit you immensely. However, the liability is shared when it comes to a joint account, so you’ll both have to be responsible. Remember that a bad decision won’t only affect yourselves, but also your partner.

As noted above, the amount of money that you owe affects 30% of your credit score’s total. In order to avoid major impacts on this area, always pay your bills on time! This includes your credit cards, but also your mortgage and your loans. Debt collection is hard to overcome, which is why you should take strict measures to avoid falling into it in the first place.

When you’re a beginner, patience is key. It can take you up to half a year to achieve a good score or report. Once you have, though, your work isn’t complete. Your score will grow if you keep making conscious, sensible, and good financial decisions, but you could end up broke if you make big mistakes regarding credit and other aspects of your financial life.

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