How To Build Credit History And Why It’s Important

I remember a story from when I was kid about a great aunt of mine.  She and my late uncle had paid cash for everything in their lives.  When they needed a new car, they wrote a check for the full amount.  When it was time for a house, it was paid for.  This was very responsible, but there came a time when my aunt wanted to build credit and she couldn’t.  She was over 70 years old at the time and had no credit history!  Yikes.  Ever since then, I have understood that it’s important to build credit.  So how do you build credit history?  And why?  Here are a few simple answers.

The Importance of Credit

There are a few good reasons to make sure you have a credit history.

  1. Future Need.  My aunt had no real need for credit.  I’m not even sure what the circumstances where that led her to find out she had no credit history.  In truth, she probably didn’t need it.  But, you never know when you might.  It’s good to have a credit history for the times you might need one.  Even if you don’t foresee such circumstances, they very well could be out there.  So, be prepared.
  2. Opportunity.  At the time that this happened with my aunt, rewards cards really weren’t a thing. But now they are.  Nowadays having credit history might set you up for opportunities to save money.  Having these opportunities available is key for you never know when they’ll pop up.
  3. Owning Your History.  Identify theft is a huge thing nowadays.  What if my aunt had her credit stolen?  Without a credit history, she might never have known!  Take control of your own credit history and then it’s yours to build and track.

How To Build Credit History

Building credit history doesn’t have to be complicated.  It can be done in a few easy steps.

  1. Open a credit card.  This is pretty basic.  Open a card in your name.
  2. Set a small credit limit.  When you are starting off, make sure to get a small limit.  If you haven’t used credit cards before, don’t get overwhelmed.
  3. Use the card occasionally.  Having a card will start credit history, but using the card is even more important. That’s where you’ll start getting judged on how well you use your available credit.
  4. Pay immediately.  Use the card in place of cash.  Don’t make extra purchases with your card.  Instead, just make purchases you would have anyways.  All you need to change is how you pay for your purchase.  When you choose this method, pay the card immediately.  Using the card and paying it off will quickly build you to a great score.
  5. Track your credit.  Once you start building credit history, you’ll be able to track your credit.  Use one of the free annual checks.  Make sure that you are seeing only what you expect to see.

In the end, a solid credit history can only come after you take that first step toward building it.  A small step or two can go a long way toward building lifelong stability.

Readers, how did you start building credit?  What was your reason at the time to get started?  Any other tips?

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4 thoughts on “How To Build Credit History And Why It’s Important

  1. Many years ago when my husband and I were starting out. We had no credit history. We paid cash for everything. To remedy this, we bought a nice set of pots and pans on credit. We faithfully paid it off over several months. I still have those pans, and a memory of how we happened to get them. This action did give us some favorable credit history.

    • Awesome! That’s cool that you have something to look at as a reminder of different times. It’s always nice to have those tangible reminders of different times in our lives. Thanks for the comment.

  2. I agree with you 100% on building your credit and the power of good credit and using it as a leverage. Recently, I went with my daughter to buy her first laptop at a store nearby. She was asked if she wants to open a store credit account. The offer was for 6 months interest-free credit. She flatly says no the fact that she’s ready to pay cash from the money she made from her part-time job. Not so fast I said. Go get the card so you can start building your credit. She looked at me and goes, why, I have the money to pay. Had to do a little explanation and she agreed. She was then approved for a lot more than what the price of the laptop.

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