what is Credit?
Do you have a credit history? Do you know if your credit is considered "good" or "bad? Better yet, do you even know what credit is?
If you have no idea and are now having a baby panic attack, it's okay. We're going to figure this credit shit out together.
Credit is part of your financial power. It helps you to get the things you need now, like a loan for a car or a credit card, based on your promise to pay later. Working to improve your credit helps ensure you'll qualify for loans when you need them.
How to tell if you have credit history:
1) If you have opened at least one account with a creditor.
2) If you have any kind of line of credit: a mortgage, auto loan, credit card, student loan, personal loan, etc.
If 1 or 2 applies to you, we advise you to check your credit score. Checking your credit score is free, simple, and super fast. You want to check your credit every so often but not as often as you check your bank account to see if your check hit on the 1st & 15th of the month.
As a young adult credit may look scary and like a whole lot of complicated information that you are not ready for yet but that is not true. Credit cards are usually not recommended for younger people simply because we can be irresponsible as shit. We are usually told not to get one, even though they seem super enticing.
The ironic part about all of this is, YOU CAN'T DO SHIT WITHOUT CREDIT. Credit gives you financial freedom, it allows you to get an apartment or a car and many other big baller things. I bet you didn’t know that a bad credit score can even prevent you from getting a job or into the school of your dreams. Credit shows how responsible you truly are with your money and life in general, so we're here to say fuck that, WE ARE RESPONSIBLE! It is up to you to make the decision to be responsible. You are fully capable of growing a powerful line of credit, especially when you understand how it works.
Credit simplified:
Step 1: Go to your local bank such as Chase bank or Bank of America, ask to speak to a banker and say that you are looking to start building your credit and that you would like to apply with the lowest interest rate possible. Interest is what you pay the bank to lend you money, but don't worry! Most banks give you little to NO interest if you are a first time customer. Even if you are paying interest, it’s worth the $5 or so every month to grow your credit (trust us, it will save you a lot of time, money, and stress in your adult life). With great credit comes great opportunities.
Step 2: Wait. Typically the process can take up to two weeks, you will receive a letter in the mail.
Step 3: BOOM! You have a credit card! But don't go spending it. Step four is a crucial step in painting and growing good credit.
Step 4: The trick is to only spend 20-30% of your limit every month and pay it off A.S.A.P!
So lets your credit card balance is $500. Spend $150 a month and pay it off at the end of each month. Find a small monthly bill to pay if you can, a phone bill is a great first bill to start paying on your own. Don't use it for random shopping, this will become a bad habit. Remember, credit is not free money, although it might seem like it at the time. Set up automatic payments and stash the physical card so you're not tempted to splurge. Before you know it your FICO score will rise as well as your credit limit.
It's LIT, the first step to success is knowing how to get there! Good luck, and don't get lost in the sauce.