Building a credit might seem like a mystic and obscure ritual that only a few of us are capable of performing through tremendous sacrifice. Of course, that’s misconception stems partly from ignorance and partly from laziness. Maybe you simply haven’t seen the necessary information written in everyday language and you don’t feel motivated enough to do the proper research while you’re occupied with your student life.
Here are different variables that are used when credit bureaus calculate credit scores and let you know what you can do to work on all of them as a laymen. To say it the simplest way, your credit score is a numerical representation of your financial history and the measure of your trustworthiness for potential lenders. We can debate whether it’s appropriate to use a single number to determine someone’s life and future, but that’s simply what happens every day.
First thing that is measured in your credit score is how diligent are you in paying your bills for the credit lines you have. The keyword here is, not surprisingly, credit. This means that having debit cards or paying your utility bills won’t help you, because you’re making payments using your own money not credit that some third party extended for you. A good way around this is deciding that you’ll pay for certain purchases, that you’d make anyway, such as gas or groceries, with your credit card, and then setting up automatic payments on your debit card to make sure you make credit card payments for the items you bought on time.
Length of credit history is something you can’t work on overnight. First credit card you open will usually have low limit and not too many perks, but ideally you should never cancel it. Having one card will increase your credit score a bit, which will allow you to acquire another one, preferably with better terms. The average age of all your open credit lines is taken into consideration, so it doesn’t make sense to keep applying for and then cancelling your … [Read the rest]