Since high school I’ve always had some strange fixation with my credit score. In the effort of winning this ‘game’ (win = high score) I’ve talked with a lot of different people (both students and those in the credit industry) and tried many different strategies. Some definitely worked better than others and a certain few actions were more effective than all others combined. As I got a bit older and my credit score became higher (it’s now right around 800/850) I began to see the benefits of having a high score. For example, I just applied for a premium credit card with awesome perks—as a student—and was instantly approved with a $13,000 credit limit (a new personal best). I’m no longer asked to put down a $600 security deposit when opening a new cell phone line and I could get a super competitive rate on any loans I wanted to take out. While these may not seem like big perks now, when you get close to graduation you’ll thank yourself for paying attention. Because I like you, I’ll condense the past 5 years of my hard work and observation into 5 steps that if taken, will get you a killer credit score.
As most people who read this are in their teens/early twenties, I’ll assume you have no credit score. For those who have already started and have low scores you should work on fixing your score first, although reading this should be beneficial to you as well.
1. Get a credit card no matter what
That’s right, I said it. Keep in mind that credit scores are not meant for the individual, they’re designed as a metric for the bank to see how much of a credit risk you are. No matter what you’ve heard, if you want to build a great credit you need to use credit—the easiest way of which is through credit cards. However, I guarantee that if you’ve applied for a card without any history, you’ve been rejected. Why? Because the bank has no idea if you’re a risk or not. Rather than take the chance, they leave it up to you to prove it to them first.
Solution? Start off with a secured credit card. This works by giving the bank a deposit (I originally started with $300) that they keep for a year (and they don’t pay interest, either). In exchange they’ll give you a full-on credit card with a credit limit of the security deposit. After a year passes and you’ve shown good usage, the card converts to unsecured. Keep in mind long-term these cards are not very useful (5 years after opening my secure card it now has a limit of $1800), however they are crucial for beginning your credit history.
Important: make sure to… (more…)