Getting your first job in the world of adults is an important step in life, yet your finances are surely still traumatized by the times when you were eating Ramen noodles for breakfast, lunch, and dinner. Well, it’s time to build some credit – an act similar to trying to join the exclusive club whose members should write a recommendation letter for you from one of their friends whom you have never even met before. The system is not working in favor of rookies, but there is no excuse whatsoever to end up in debt while trying to hack it. Here is how to make your empty financial sheet work for you.
First of all, don’t feel bad about your nonexistent history of transactions. In reality, lenders are hungry to get their hands on you as you are an empty page who now earns money. All you have to do is to prove your existence and pay your bills on time. The secured credit card is going to give you an opportunity to do it. Deposit $200 with Discover or Capital One and pay your first bill in full.
Never leave any balance on your card. Indeed, your uncle told you that you should leave a bit of money on your credit card in order to improve your score? Not true. The only thing you would be doing is paying interests. Try to keep your utilization rate under 30% but it would be even better if you would ensure that it is close to zero. No, it is not required.
All you need to do is to make your life easier. Set up an automatic payment for all of your bills. Your payment history counts for most of your credit score and a missed bill may destroy your chances of getting one for several years to come. Think of it as improving the character statistic in a video game by repeating dull quests (paying bills in time).
After six months, login to Credit Karma to check out your credit score. If you think it looks good enough, then apply for a rewards card such as Chase Freedom Unlimited. Eventually, you are going to graduate from the secured credit card. That is how you are going to build your portfolio.
What you are going to need here is patience. There is no way to speed up the process for the algorithm, but you may always avoid silly mistakes. Try to keep your oldest account opened forever as it is going to increase your history. And suddenly, you are going to be signing the contract for renting your own apartment without involving your parents as guarantors. That is the very definition of “adulting”.