You may not think about it now, but good credit is super important. Building good credit now (while you’re just starting out) can help you get a great deal on a loan when you’re shopping for a new or used car, or buying your first place.
The better your credit score, the more likely it will be for your banking institution to give you a low rate on a loan, (it’s called risk-based lending). They will feel more comfortable giving you a large loan (like $350,000 for a condo) if you have showed a good history of paying back smaller loans, like monthly credit card bills.
Good credit says to your bank “I am responsible with money.” Good credit says “I can purchase something more expensive since I am saving money by paying LOW interest.”
What this means is, you want good credit!
What you need to know for building good credit:
- PAY ON TIME- payment history is 35% of your score.
- Never use more than 50% of your available credit
- Keep your old accounts- Accounts older than 2 year look GREAT on your report!
- Limit opening new credit accounts frequently -Too many accounts opened for a short period of time look bad.
- Have different types of credit- credit cards, a car loan, and a mortgage.
Learn about how credit scores are created in less than two minutes (video): Understanding Your Credit Report