Teenagers: How to Increase Your Credit Score
Just getting out into the world after graduating from high school can be difficult. You want to get out of your parents house, you want to build independence and not have anyone telling you what to do. It all sounds so fantastic, doesn’t it? Well that kind of freedom comes with just as many chains as living with your parents. Many teens forget that there are bills to be paid and responsibilities increase exponentially. One of those several responsibilities is your credit score. It’s not something many people learn about in school so they don’t know that at 18 just getting out of school that you have no financing history at all and that having no financial past makes it hard to start out. Here are some tips on how to increase your credit score.
The credit you hold is what determines what loans you can get, if any. Banks, auto dealerships, insurance companies, landlords, and even colleges look at your payment record to see if you’re good with paying off your debts or not. If you have a really low rank, the likelihood of borrowing money is slim to none. If a company decides that, even though you’re marked as a “High-Risk”, they want to take a chance on you, they’ll increase the interest rate to a higher percentage than if you had an average to excellent score. Having no payment track record at all means that they can’t tell if you’re a good risk or a bad one. More often than not people would turn you away because of that. Although they may consider you if you had a cosigner with good credit; this would make it so you could build your credit score a little sooner than using bank cards.
How to Increase Credit Score
The most common way to build a good track record and increase your viability is by signing up for a secured bank card. This kind of card requires a security deposit of about $300-$500. Usually the amount you can use on these cards is the amount you deposit into it. This is an easy way but also slow. Use the card at least once a month on something you know you can pay off completely. That means you shouldn’t buy a $1400 computer if you won’t be able to pay it all off later. Use it on small things such as cheap meals or some books. Doing that makes it possible to get it paid off when the bill comes due.
Making a late payment can cause your financial ranking to take a hit, so make sure that your bills are paid off on time and in full. After about six months of using the secured card you can try and switch to an unsecured card, which will have no cash limit. As long as you maintain on-time payments your FICO status will continue to increase.
The next best way to increase your ranking is to go to a used car dealership. Buy here pay here used car lots give loans to high risk borrowers and people with no record of borrowing money. This gives you a chance to prove that you can pay off your debts and in building your rank, plus you get to buy your first vehicle. A dealer finances you into a decent car that you can afford and after a few months sell your note to a bank or other lender. After selling your note you would finish making the payments agreed between you and the dealer to the bank until they were completed. This in turn would increase your financial score to a fairly decent one. This is also a pretty quick way to get a desirable rank with little work.
The main thing to remember about how to build your payment history, is that it starts with being in debt. Increasing your score requires that you borrow money. So there is a cost to creating a good financial status. There’s no way around it. Build it and they will come.
Using a bank card means that you borrow money for a time but you pay it back. The same goes with a car loan, a school loan, a bank loan, and a house loan. Paying off these debts in a reasonable amount of time and in full helps in building your financial status. Failing to make your payments or not paying all of it when it is due means that your rankings will drop. It may drop only slightly or significantly depending on what kind of loan it is. So if you’re 18 with no payment history, just remember to slash your debts and maybe in a few years you can get that awesome new car, or even put a down payment on a house and start up a mortgage loan. It seems like it’s a lot of work, but breathe and hang in there, soon you’ll be building a ranking in the 700’s.