Yes, I am at the young age of 21 but I have something that most folks within my age group do not have which is….GOOD CREDIT!!! From what I have been told within my age group we either have bad credit (580 and under) or no credit at all, which is a bad thing but I am here to help y’all either start your credit right or to fix it from what I have done and learned through the years! “You wanna know what’s more important than throwin’ away money at a strip club? Credit.” – Jay-Z (The Story of O.J.)
So….boom when I was ready to start my journey into this world known as credit I didn’t know much about it because I was only 18 years old! Here it is:
- Start with a small personal loan. My parents began to talk to me about building my credit and the possible things that I could do so we began to weigh my options either start me out with a credit card or get a small personal loan through the credit union I have been with. So what option did we go with? The personal loan which was only $500 so my payments were about $50 a month. Nothing too major and something that I could handle since I was only working at Chick-Fil-A at the time and just starting my journey in the military. SO PLEASE HAVE A STABLE JOB!!! The financial institution you will be borrowing from will want their cash and then some.
- Pay it off or get another loan? Get another loan at a bigger amount. Call me crazy but it’s going to make sense in just a second. I was eager to pay off the full $500 with some interest….GREAT!!! In that state of excitement telling my parents, they turned around and told me “Time to get another Travis just a tad bit bigger.” Now, I was confused why do I need to keep continuing this constant pay out of my hard earned money? Here is why your credit is forever growing so you need to keep something revolving which is more than likely going to be something payment wise. At least do it until you get to that amazing credit score which is about 700 and above.
- Note: CreditKarma.com is one place that is free where you can check your credit score. Even though most banks pull a FICO score. What is FICO? “FICO looks at a range of credit information and uses that to create scores that help lenders predict consumer behavior, such as how likely someone is to pay their bills on time (or not), or whether they are able to handle a larger credit line.” – Credit.com
- Make those payments! I am currently still paying my second loan off ($1000) but once again I am getting to that point where I either get another loan or just pay this loan off as a whole. I am leaning towards paying it off as a whole because I now have a credit card but I will get to that in just a second! Your credit score is nothing but a score of how responsible you are with your finances. “But Travis with all of this talk…why is credit so important?” Is the question you are probably asking here is why, “it helps you to get the things you need now, like a loan for a car or a credit card, based on your promise to pay later.” – MyGreatLakes.org
- Having My First Credit Card! To some people, this is taboo for a college student because sometimes we can get a tad bit out of hand when it comes to a credit card. However, this will not be you! As always my parents were assisting me with my credit card search but one day over the summer I took the search into my own hands. I sat down with myself and figured out which option was best for me and showed my parents. I had my first pick which was with my primary bank and my second choice is my credit union. Now, it was time for me to visit these financial institutions and apply. With a slight nervous spirit, I went into my first choice bank and applied and chose which card I wanted. I applied and my credit was checked and I was complimented on my score and was also within the range to be approved. However……I was:
Low-key I had the shame face and was heavily confused but had an understanding of my denial one big reason was that I did not have any type of revolving credit (will inform in a second) along with I did not have enough things that could build up my credit enough for my bank to be like “oh yeah here you go, Travis!” So walking out with no paper work I dawned on what the lady in that office said to me “Since we know that you are with a credit union try them because a majority of them are more lenient when it comes to credit cards.” Which was my second choice! So I raced down to my credit union which was less than ten miles away and ran inside before my shift at work started. I ran through the same application process and chose which card I wanted….and after a while I was:
With a really good interest rate and a $500 credit limit! Pretty simple and low which it should be starting out! With newly found plastic responsibility I have to properly use the credit card. Which simply means….NO RANDOM SWIPING!!! Even though my first purchase was a pair of Nike Uptempo ’96 sneakers. It was a small reward that will be paid back by the end of this month. If you can folks try not to carry a balance there is nothing wrong with it but if you can pay it off by the end of that month…DO IT.
So that is my journey summed up! Here are some things that you need to know though about credit and how to build it:
- The most common types of credit would be:
- Installment loans: A set amount of funds loaned to you for a specific purpose. Examples: Student loans or auto loans
- Revolving Credit: Line of credit you can keep after you pay it off. Purchases are still able to be made as long as the balance stays under that limit. (i.e my $500 limit) Having a credit card is the most common type of revolving credit.
- Interest rates are the cost of borrowing the money.
- The majority of places that offer credit cards will give you different choices of cards that may have special benefits pick which one best fits your life.
- A Fair Isaac’s FICO score is the most commonly used credit scoring formula.
- Ranges from 300 (low) to 850 (high)
- Higher the score the better.
- Your score can vary between the agencies.
- Hard inquiries are when a creditor accesses your score and credit report. A high number of these shows potential creditors that you are trying to open up more than one line of credit and they can possibly deny you from loaning you money.
- Soft inquiries are when your credit report is looked at when you are not trying to open a new credit line. Examples: Accessing your own credit report or landlords running a credit check.
- What can cause bad credit?
- Bankruptcies (Stays on credit report for 10 years)
- Late payments
- Good Credit Tips
- Avoiding too many credit inquiries within a short amount of time.
- Check your credit score often.
- Low balances on credit cards
Yes, this is a lot for you but just take your time with your credit journey and read while understanding of what is going on with your journey. Bad credit can become good and new credit can become good also so whatever is going on with you just know there is a positive outcome! PAY WHO YOU NEED TO PAY ON TIME!!!!
I SPOKE ON IT!!!!
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