You’re young, and if you’re like most Americans in their twenties, you probably haven’t been financially independent for very long. If you haven’t ever used a credit card, obtained a loan, or paid rent before, then you might not have much of a credit score. Unfortunately, that can cause serious setbacks later in life. A lack of credit history can lead to high insurance rates, as well as problems when it comes to applying for mortgages or apartment leases.
Fortunately, there are things you can do as a young adult to build your credit score (or repair it if it’s been damaged).
Start Using a Credit Card
The easiest way for most people in their twenties to improve their credit score is to start using a credit card to make their regular purchases. Having a credit account alone will help improve your score, but paying off your monthly debt will help even more. As the credit bureaus start to see you responsibly handle debt, your score will slowly (but surely) begin to climb.
Make Payments on a Loan
Just like with a credit card, payments on a loan can strengthen your credit history by proving you’re a financially responsible individual. Making payments on an auto loan or student debt will give you a solid track record and eventually give you the credit score you’re looking for.
Don’t Spend Money You Don’t Have
The biggest mistake people make when it comes to building credit is spending too much. Keep things simple: if you don’t have the money sitting in your bank account, don’t put the debt on your credit card. Only make purchases you can reasonably pay off as soon as the bill rolls around.
Pay All of Your Bills in Full
Every time you miss a payment on your electric bill, water bill, cell phone bill, or any other kind of regular fee, your credit score will take a hit. Set reminders on your phone so that you never forget to make your payments on time. You can also enroll in an autopay system so that you never miss a payment. Over time, keeping up with your bills will give you a strong credit history and open future financial doors for you.