1. Apply for a Credit Card
The quickest and easiest way to build your credit is with a credit card, preferably one with no annual fee. Your best bet may be staying away from department store cards — they can be more trouble than they’re worth. Ask for an increase in your limit once you’ve been using the card for several months responsibly (and paid on time every month). In most cases, your credit score will go up when that happens [to elaborate – this means that by asking for an increased limit, the balance on the card at any given point of time decreases which makes creditors view you as a less risky borrower- increasing your chances of being approved].
2. Set up automatic bill pay
Make sure to pay all your bills on time, every time. The easiest way to stay on track is through automatic bill pay through your bank account; look for a checking account that will let you schedule transactions ahead of time. That said, the downside of automatic bill pay is that it doesn’t always catch all payments (like rent), so make sure to check your credit report regularly and monitor any changes in your payment history [to elaborate – by making it automated, this means one less stressor in life because you don’t have to worry about forgetting to pay bills].
3. Keep Balances Low
Ideally, you want to keep utilization under 30% because that’s an important part of your credit score calculation (credit utilization ratio accounts for 30% of the FICO score).
4. Don’t Open too Many Accounts at Once
Opening several credit cards and/or loans all at once is risky. Lenders generally will only review an application for a “hard inquiry,” which means your score can drop by several points if you are overly aggressive with your applications [to elaborate – opening multiple accounts are likely to have very similar offers in terms of applying, i.e. interest rates etc., so therefore one should focus on getting the best deal possible].
5. Have patience Building credit takes time, but it’s worth it in the long run. It usually takes six months to a year before creditors will start to take into account positive information from new accounts or payments history that wasn’t there when they first issued your credit report. When you’re in the market for a car, home or apartment, having good credit can help you get better rates and terms on financing.
