As a teenager or 20-something, you most likely have your whole career and future ahead of you. Whether you’re attending college or pursuing your career trajectory, this stage in your life is critical in setting yourself up for future success.
You’ll often hear the importance of saving and setting aside funds into an investment plan or for larger expenses down the road. Particularly if you invest in a high-interest stock, bond, certificate of deposit or other type of investment, the effort you put in now can have a huge pay-off down the road.
This stage of life is also a perfect opportunity for you to start building your credit and credit score. Having good credit is very helpful when seeking out low interest rates for loans and getting approved for things like mortgages and credit cards.
But when you have little, or no, experience in credit card usage or other credit-building practices, how can you get started? Here, we share some helpful ways you can easily build credit in your teens and 20s.
Start With a Credit Card
One of the best ways you can establish and improve your credit is through using a credit card wisely. Making consistent monthly payments and now allowing yourself to carry a balance from month to month can show lenders and creditors that you are capable of making payments on time and are responsible enough to handle it.
Depending on where you’re at in life, there are different credit card options that can meet your unique needs. Some credit card companies offer credit cards just for students, and provide rewards for getting good grades and for being a responsible user. A secured credit card requires a collateral to ensure your commitment to paying off the balance you accumulate every month. Still other rewards credit cards may be available to you to get started on building credit and getting to where you want to be financially, even at a young age.
Note that for security and responsibility standards, if you’re under the age of 21 and looking to apply for a credit card, you’ll need either proof of income or someone else to co-sign on the account with you.
Be an Authorized User On Your Parent’s Credit Card
If you’re young and just starting out in the credit spending game, and aren’t quite ready for a card of your own, look into becoming an authorized user on your parent’s credit card account.
Being an authorized user means you can use that account to improve the credit score on that account, while still being responsible for your own purchases. Your parents can monitor your usage and make sure that you’re making wise financial decisions.
Utilizing your parent or guardian’s account isn’t ideal for the 20-something out of the house, but it is a great way for teens and those still in high school to start practicing wise financial habits and establish themselves as credible and wise in managing their money.
Practice Wise Financial Planning
When you start off with key skills in budgeting and wise money management, those habits tend to stick with you over time.
Maintaining a clear and stable budget allows you to know where your money is going at all times and be smart about how you save and spend your money.
Be conscious of how you spend your paycheck – no matter how small or large.
Make sure your budget includes areas to cover your monthly expenses like bills, groceries and entertainment.
Set aside a portion of your paycheck to put toward future savings, whether that be for student loans, a down payment on a house or for retirement. You work hard for your money.
Be sure you know where it goes each month by practicing healthy financial habits with a budget.
And soon enough, your ability to pay your bills without trouble can help you boost your credit as you move through adulthood.
Pay Your Bills
Whether you still live at your parent’s house or are out on your own, be sure the bills you are responsible for get paid. Being consistent and proactive about making sure your bills are covered not only ensure that the lights stay on and the heat continues to work. Being responsible about your bills also shows companies that you can be trusted to pay what you owe, therefore boosting your credit.
It’s Never Too Early To Start Building Credit
Especially if you’re still in high school or just transitioning into college or a career, it may be overwhelming to think of how you can get going on building a solid credit foundation. But with these easy strategies, you can start planning for your future financial success right now. Discover the methods that work for you and establish yourself as someone with great credit already.