Establishing good credit is easier and simpler than you’ve heard; you just have to be careful with the credit products you’re given access to. Lenders want to give out money — it’s how they make money — they just want to see that you’ve demonstrated a modicum of responsibility with the money you’ve been lent in the past. According to the Fair Isaac Corporation, which makes the FICO score, your credit score is based on five metrics: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and types of credit used (10%).
Therefore, the first thing you should do to establish good credit is get a credit card. Now. Due to new regulations in the CARD Act, you might need to have your parents co-sign for one if you’re under 21. The sooner you do it the better, but be careful. Avoiding the industry for as long as you can is understandable, but you need to take part in order to establish credit history. Though credit ratings don’t take your age into account, they do take the number of years you’ve had a credit score into account, and you’d better believe that a longer credit history makes lenders more willing to play ball.
Next, you must pay your bills on time, and avoid maxing out your cards. In fact, most sources recommend not going over 30 percent of your credit limit. If you have a student credit card with a $2,000 credit limit, that means keeping your balance below $660 — meaning that you ought not finance big purchases or Spring Break with your card just yet. The best thing you can do to demonstrate your ability to pay back money lent to you is to always pay it back in full, every month. That will require that you don’t spend more money than you can afford, and that will demonstrate to lenders that you know how to behave responsibly with credit products — it’s all common sense.
Short of that, just make sure to never miss a payment, and keep your balances low. Lenders don’t need superstars, they need people they can trust.
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