Building Credit at Any Age

Building credit is an important part of personal financial management. While it takes time, it’s never too late to build good credit so you can have more financial opportunities, like taking out loans, credit cards, or receiving lower interest rates.
 
There’s more than one type of credit, just as there’s more than one type of way you can build credit. Understanding both the types and ways you can build credit will make it easier to determine how you should go about increasing your credit score.
 
Types of Credit
Revolving credit has a specific amount, a minimum monthly payment, and can include interest on any balance leftover. Credit cards are the most common form of revolving credit.
 
Student loans, mortgages, car loans, etc., are what we call installment credit. This credit is given in a lump sum and paid back in fixed monthly installments.
 
Service credit is credit built when you have an account and pay for monthly services, such as your household utilities and cell phones.
 
How Credit Score is Determined
Your credit score is determined by five different factors.

• Payment history: The most influential credit factor, lenders want to know if you will pay your debts on time.
• Amounts owed: This factor lets lenders know how much you are relying on debt for your spending.
• Length of credit history: This factor not only considers your oldest to newest credit accounts, but also the length of time for each account.
• Credit mix: While not as important, having a credit mix with different credit types (revolving or installment) can help build your credit up.
• New credit: This factor applies to how often you open new lines of credit.

 
Building Good Credit
There are many ways you can start building your credit today. The most common is to open a credit card. Using a credit card to make small, everyday purchases is a good way for everyone to start building credit. There are now a variety of credit cards you can select from, including hybrid, student, and secured credit cards that make it easier to both open and manage.
 
 
For younger individuals, especially high school and college students, becoming an authorized user on an existing account (such as a parent’s account) could be the right answer to start building credit. Just note that since the payment responsibility lies with the owner of the account, the credit history for the authorized user won’t accrue as quickly as it would with their own credit card.
 
Don’t want or can’t get a credit card? You can still build credit using loans. Student loans and auto loans are two common options for building credit. In addition, you can use a cosigner to help acquire the loan. Just make sure you can pay it off and not put your co-signer in a bad credit situation.
 
When it comes to building credit, there’s more than one way to achieve a good credit score. But no matter which route(s) you take, it’s important to make responsible decisions to stay out of credit trouble. This means spending only what you can pay back, paying balances in full and on time, and keeping your debt in check.
 
 
For more information on how you can build or improve your credit score, give us a call today and let us walk you through all your options.



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