Credit building is an important part of your financial wellness journey. When you’re trying to secure financing to purchase a car or home, lenders and other finance companies will typically check your credit reports to review your payment history and other credit attributes.
Since you essentially need credit to build credit, here are some ways you can establish and manage your credit after school:
- Start paying your student loans.
If you have student loans, making timely payments every month can help establish a positive credit history.
- Apply for a secured credit card.
A secured credit card (which is backed by a cash deposit) is intended to help you establish credit so that you may qualify for unsecured credit cards (that don’t require the borrower to make a deposit) and make other large purchases on credit.
- Pay your bills on time, every time.
Making on-time payments is a great way to improve your credit and build good credit history. You can set up automatic payments and/or electronic reminders to help you stay on track with monthly payments.
- Keep your credit utilization low.
Your credit utilization ratio is how much of your total available credit you use. Most experts recommend using no more than 30 percent of available credit on any card.
So, what are the benefits of credit building after school?
Since credit and finance companies view good credit as a sign of trustworthiness, people with good credit histories are considered to have high creditworthiness. This enables you to get approved for accounts with higher credit lines and loans with lower interest rates.
- Qualifying for auto financing, mortgages, and insurance premiums
People with good credit history usually qualify for prime car loans or financing when buying a car, and prime mortgage rates when buying a home. Generally, the better your credit history, the lower interest you pay. Some car insurance companies also factor in your credit report when determining your monthly premium.
- More financial opportunities in your career and personal life
In some states, employers can check credit reports before making a final offer. Building a positive credit history may signal that you are financially responsible. Additionally, if you’re embarking on major financial investments like purchasing a home or car, you’ll have a better chance of getting the financing you need when you have good credit.
Are you a recent graduate in the market to purchase a vehicle? A car dealer enrolled in the Credit Acceptance auto finance program can help you get approved for financing.
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