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.
- 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.
- 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.
- 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.
- Open a credit card. This is pretty basic. Open a card in your name.
- 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.
- 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.
- 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.
- 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?