If you think a credit score is no big deal, and therefore you’ve skipped out on getting a credit card or doing anything else toward establishing a credit history, you may be in for a rude surprise down the line.
When you’re ready to buy a car or a home, rent an apartment, or even apply for a job, you might find yourself unable to secure that car loan or mortgage, or pass muster on the rental or job application of your dreams. Here’s why: in order to assess whether or not you are a good risk for paying back your loan, your potential creditors need a way to see if you have a track record of paying back money that you owe. The best way for them to do this is to look at your credit score.
You may be a perfectly trustworthy person, infinitely reliable and absolutely capable of paying back every cent you borrow, on time and in full. But if you’ve never established this fact through an institution that reports to a credit bureau, there’s no way for a bank, landlord, or employer to know how great you are.
It’s easy to establish credit
If you’ve never had a credit card before and find yourself starting from a blank slate, don’t worry: it’s not hard to establish a credit history and build a good credit score. It may take a little time, but if you’re a person who pays bills on time, you won’t have any problem.
The best thing to do is apply for a credit card designed for folks just starting out. This can be a student credit card, a credit card for people with limited credit, or even a secured credit card. Usually, you can get a student card even if you’re not a college student, so don’t let that hang you up.
What to look for
Look for something with minimal fees, a low APR, and a low credit limit. Even a credit line of $500 can help you begin to establish credit. Apply for the card, and when you get it, begin to use it immediately. Just make sure you will be able to pay off your balance in full each month. It won’t take long to see your credit score begin to climb.
Before you know it, that car, apartment, house, or job will be in your sights.