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Building credit is increasingly becoming an essential part to adulthood. What are the main things an individual must know when initially building credit?

#credit # #financial-planning #financial-services #commercial-banking

Thank you comment icon Paying your bills on or before time everytime. Paying your bills late will bring it down. Only get things that you can afford to pay for. Do not pay for everything with cash.(Meaning use a card or something, because it is constant and consistent paying that builds your credit). Start low or easy, do not start with a thousand bills, start with one or two, that you can handle. Uniququa S.
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Katya’s Answer

when I think of my first credit card and it wasn’t by far the best experience due to lack of knowledge . I wish someone explained to me the differences on credit card types.

for example- it’s important to find credit cards that offer zero interest rate for a least 12-15 months. It will allow to use the card, build your credit history and not pay any additional interest fee.

I think the number one when it comes to building credit is to use credit wisely- meaning- use it only when you need it. always pay your bill on time- must make the monthly minimum payments-in order to avoid any late fees and additional accrued interest. because in reality- if you buy something for $100 and after 3 months end up paying more around let’s say $150- then it might not be the best option to use credit cards that have high interest rate.

To avoid any late payments- always make sure that you set up an online bill payment- if you want to make additional payments on your credit card- you can always and it’s also a good way to repay the remaining debt.

your debt to income ratio should be 40% aside from your income and never more- you don’t want to start spending your entire paycheck on credit card payments and interests.

always- check to see your credit score and if there are any inquiries done - you should not have more then 3-4 credit cards and only use the ones that hav egrets rewards such as cash back, travel, miles- all depending on your need.
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Jeff’s Answer

Some of the most important things to know is to realize you want a long history of not using more credit than you can handle. I’ve advised many young people with their first apartments that they can establish credit history my getting a utility bill in their name (possibly with a cosigner) and make sure it’s paid on time. It’s most likely that it will be paid on time if it’s set to automatically withdraw the entire amount from someone’s checking account. If you have multiple roommates, have at least one bill in each person’s name and a mandatory meeting on the first of each month to square up the difference from last month’s bills. If you have credit cards, set them to all pay off in full from your checking account at the end of the month. This will force you to not carry a balance and always have more credit than you are using. Most agencies consider credit cards balances that are too close to the limited as maxed out and seriously hurt your credit rating.

Jeff recommends the following next steps:

Set up credit cards to pay off in full automatically from your checking account each month
Check the balance to make sure you never have more usage than money available.
Set up utilities to pay off in full each month from your checking account.
If you have roommates, have a different utility in each person’s name, set each one to pay off in full. and meet each month to settle the difference.
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Anwar’s Answer

There are a lot of good answers here. My personal experience has been tough initially which happens to a lot of young professionals. I ended up taking card consolidation loans twice to get out of debt. That taught me a valuable lesson in life to be able to live within my means. Now I track all of my spend, reconcile the charges and pay off all of my bills monthly. If you get cards with benefits such as cash back, airline miles etc., paying off your monthly balances can earn you those perks.

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Roger’s Answer

There are very few things in life that I am really good or great at. But, I do enjoy a PERFECT "850" FICO Credit score. I’ve had nearly perfect credit for most of my life. I got my first VISA card when I was a junior in college. I had a $500 credit limit. When I got my first VISA bill for $100 for gas, beer, movies.... I sent VISA $1000 to pay a $100 bill. And, I had a "credit" for months where VISA actually owed me money because I had money in reserve on my VISA by paying far more than the actual bill.  (I still do this today... if my American Express bill is $5000 --  I send AMEX $7500.)  Paying MORE than your actual bill helps you with your "credit utilization score" which is a large portion of your overall FICO Credit Score.    To earn good credit, pay your bills way ahead of time, pay more than the actual bill, and never spend MORE than what you make.

Thank you comment icon Great advice above! Building your credit is basically establishing your future. If you can show that you have good character and pay bills on time then it will help you in future with getting loans with lower interest rates. It might be the difference in you getting a job you really want as a lot of employers pull your credit. If they see you are paying on time and not getting overextended with credit card debt it will give them a favorable impression of you. So start slow with what you can afford and get credit card and then build yourself up with paying like rent on time for an apartment and car loans etc. Show steady progression of being able to pay credit card on time and than that you proved you could handle rent and an auto loan. Brian Downey
Thank you comment icon While paying off a credit card in full each month is extremely helpful, the practice of paying more than one owes is not within the capabilities for many young professionals. I recommend tracking all your expenses in online software such as Quicken or Quickbooks, making sure you check your expenses and categorize where you spend the money, and paying off the bills on time through automatic payments so that you can build an excellent credit score. Anwar Chohaan
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Shari’s Answer

I would recommend that you initially get a credit card with a lower balance ($500 or less) and use it for a specific purpose such as gas. When you charge on the card, try and pay off the entire balance by the due day. If this is not possible, always pay more than the minimum balance. Also, try and keep the card balance at about 20-30% of the card's balance. This helps with your credit utilization.
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Ellen’s Answer

You definitely want to start building your credit history as soon as possible. I started small with a gas station credit card back in the day. There was always a need for gas, so the card was used regularly and that payment was a line item in my very tight budget at the time. I agree with the other comments listed, you need to pay all credit cards and bills on time, if not early. It is OK if you cannot pay the balance in full, but avoid just paying the minimum each month. You do not want a large balance rolling over and interest accumulating. If you can find credit cards with zero interest rates, leverage those for as long as you can. Cards with reward programs can also give you additional benefits. As you build your credit, advance in your career and earn more salary, you can consider requesting larger credit balances from your key credit card companies. Paying your bills timely is only one part of the equation; you also need to show available credit from which you can potentially draw. Just make sure you have money in your budget to cover added expenses charged. Good luck!
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GANESHKUMARAN’s Answer

First step be an authorized user - someone that's permitted to use another person's credit card. This can help you start to build credit activity. Even if your card is dormant, their activity — assuming in good standing — could benefit your credit score

If you have your won credit card ,
Limit the usage less than 30% on every bill cycle.
Keep updating the your income to banking profile which can give possibility to increase your credit limit
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