Start NOW: Building Solid Credit in Every Stage of Your Life (Part II)
Written by James Chan, Dongmiao Cui   


Now that we know the various components of a credit report, we can now move on to discussing strategies that can help boost your credit rating. Building a good credit score is extremely important, as it can help you:
  • Pay less to get mortgages, car loans, and other credit;
  • Be more likely to get offered a job;
  • Get brokerage or bank accounts with minimal haasle;
  • Pay less, perhaps much less, for insurance.
This section walks you through the four stages of your credit life: and outlines direct, actionable ways that you can use to up your credit score in each of these stages.


College Years


During college years, the most important additional items are credit cards and student loans. This will require an active bank account (checking) along with cash management. In addition, now that you have started to live outside the house, you will need to juggle all the parts of the monthly budget: rent, utilities, food, transportation, and other personal expenses.  It is very important that everything is handled carefully. It is especially important that you do not go overboard with all the new available credits (be careful with Louis Vuitton handbags or Porsches).

Ideally, at this stage of your life, you have already taken advantage of most of the items listed in the Pre-College Years section. Now, it is time to start building your own credit history from scratch:
  1. Cell Phone: Get a cell phone, under your own name and pay monthly bills on time.
     
  2. Utility Bills: Open utility accounts for your apartment under your own name. Make sure that you pay the bills on time, all the time, even if it means you have to borrow money from your parents. A forgotten payment to the utility company can result in a dent on the credit profile!
     
  3. Credit Cards: Once you are older than 18, you can get your own credit cards. As a student, you want to shop around and look for cards with low or no annual fees and low interest rates. Even though you might plan to hold a few cards, you want to start opening only one account in the beginning and adding more as needed later. Opening multiple credit accounts in a short period of time will make you appear risky.

    If you do not have any credit history or if you are not able to get a regular credit card, you can apply for a secured card. A secured card typically requires you to deposit as much money as your credit limit into your credit account. If you keep good payments, you can expect to be upgraded to a regular card after a year or so.

    After getting your own credit card, you need to use it so that you have more on-time payments in your credit history. But be careful not to max out any card. A good balance is to use 30% or lower of your credit limit.
     
  4. Car Finance: Finance a car under your name if you drive, even if your parents are actually paying for it.

Return to Part I: Credit Building - Pre-College Years
Continue to Part III: Credit Building - New College Graduate

 

 
Last Updated on Saturday, 25 December 2010 05:23