Are you born with a credit score?
Nope! Not at all, in fact nothing entitles you to a credit score at all. Lets first discuss what exactly a credit score is in case we are not familiar. Like the name makes it sound, a credit score shows the quality of a person’s credit, or ability to pay back any money that they owe. You probably thought of a credit card just now and yes your ability to pay back any money on your credit card matters, but it is not the entire story.
The laws regarding credit scores are set by none other than the US credit bureau. According to US law, it will take a person six months of obtaining and utilizing some form of credit in order to have an official credit score. So to answer the initial question of where do you start, it depends on how those first 6 months go. For example, if you obtain a credit card and barely pay it off in those first fix months, your credit score will likely be quite low. The lowest possible being 300 and the highest possible being 850.
How to build a strong credit score
So first how to do you go about building that strong credit score you need, and explained later on, why is it so important. (Yes, it is very important in case you were wondering).
In my opinion, the easiest way to build a strong credit score is to obtain a credit card as soon as possible, use it and always pay off your bill in a timely manner. For example, go online to Bank of Americas website and sign up for a credit card. You will be asked personal in formation about your income, location etc, and will be approved for the use of a credit card. Then, start using your card for some purchase like concerts, groceries, clothing, anything, but always pay the full balance owed on your card at the end of each months. Also, only use your card for a small portion of your monthly credit limit. Your credit card issuer will provide you with a limit you can use your card for each month. (They aren’t going to extend you credit of 100k if you’re just starting out, probably more like 1k) your credit will be judged better if you only put $100 on credit and pay it off each month, than if you put $900 of the $1k each month. This is because it is seen ask less risky to the credit card company.
How to ruin your credit score
The best way to ruin your credit score is to, well, not pay your bill off on time. Simple as that. On a larger scale, if you are in the position where you cannot pay for your credit cards, mortgages, car payments, etc. and need to file for bankruptcy (bankruptcy involves a court attempting to work with who you owe money to, to forgive your payments or reduce them). If you file for bankruptcy, your credit score will be seriously negatively impacted! So long term, DO NOT put your self in a lot of debt, unless that debt is expected to make you more money in the future to pay off that debt.
Why does your credit score even matter?
A question a lot of readers may be asking and it is a good one. Let’s answer the question with some questions. Do you ever want to own a home? Send your kids to college? Buy a nice car? Pay for your wedding? Invest in real estate. Well, having a strong credit score will help you borrow money to support all of these activities, and will help your do so with less expense. However, with a low credit score, it may be very difficult to do many of these activities at all. So to me, having a strong credit score is very important, and it should be to you as well.