The words "young adult" and "responsibility" don't exactly live the perfect marriage at times. However, if an individual wants to secure a strong credit score and eliminate a possible lifetime of financial hardships, developing good credit as a young adult is vital.
The obvious upside to good credit is the ability to qualify for car insurance, loans and cell phone plans. When a person is stuck behind the curtain of bad credit, simple financial decisions can become immovable mountains. Here are several tips to help young people build good credit and stay ahead of the game.
Credit Responsibility and Owning a Credit Card
The first step a young person should take on the road to good credit is to become an authorized user on the credit card of a parent or guardian
Financial responsibility requires "baby steps" so the safest most responsible decision for all parties involved is the use of the credit card of a parent or guardian. An individual can learn the basics of credit card use, but also be properly monitored and "controlled" in many respects. In this process, a young adult can gain experience, but also be closely watched.
Once an individual shows responsibility and proves he or she can be trusted, the next obvious step is to apply for a credit card. This step will allow a young person to take on more of the financial responsibility. Financial advisors suggest a retail card may be the best option in certain circumstances. Retail cards have less benefits and lower spending limitations. Simple use of a retail card can build solid credit.
If an individual does not have enough credit for a retail card, the option of a secured credit card is always available. A secured credit card can eventually allow an individual to qualify for a standard credit card if responsible payments have been made.
Credit Card Help and Research
With any financial decision, proper research is paramount. When an individual qualifies for a credit card he or she must carefully select the proper card for that individual's specific needs and financial situation.
The obvious choice is to seek a card with a low interest rate, no annual fees, with fair credit limits and billing policies. Shop around and make the proper consultations to determine which card is right. When getting an initial credit card, the simplistic way is the right way.
Credit Card Use
If a person wants to get on the right track to building good credit, he or she has to use the card. In the beginning, use the card a few times and only purchase items that can be financially covered. This simple process will not only increase responsibility, but allow the individual to fully understand how the card works, and what to expect when the card is put into action.
It is often recommended to use the card for emergency purposes only when an individual begins his or her credit career. However, much is based upon the individual and responsibility level. If he or she has shown responsibility to this point, small retail charges to the card can be encouraged.
Credit Card Balance and Other Payments
Pay off the balance each month...and pay the bills. Sounds easy, right? The key to good credit is learning the basics and developing good habits. When people find themselves in credit card debt or face credit card consolidation, chances are the individual in question hit an obvious financial “bump” along the way.
Many credit card issues can be traced back to the very beginning of that individual’s credit history. Don't let an early mistake ruin future credit. Purchase what can be afforded, and pay off the balance. Also, it's vital an individual pays off his or her bills. Proven responsibility in other areas can pay dividends in the credit world. In the credit card arena, people are rewarded for accountability and dependability.
One Credit Card
How many credits cards will make a young person happy? The answer is one. Just because an individual is being responsible and following the road to good credit, doesn't mean that person should get "plastic happy" over the course of several months. In actuality, too much credit in a small amount of time can hurt a person’s credit score.
For young adults and students, one credit card is more than enough for his or her current financial standing.
Source
- Gerson, Starbuck Emily "10 ways students can build good credit" Retrieved July 1, 2009 from creditcards.com
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