If you are a recent college graduate first off, congratulations, that is an accomplishment to be very proud of! We know how difficult it can be to go to school full-time all while working a part-time or even full-time job. Kudos to you! So now that you have officially joined the “real world” as many people put it, it is time to get serious about some other really important things in life, you know, getting your first home, paying your student loans, and all those other “adult” things you have always been told about. Well here is another really important thing that you may or may not know much about, building your credit. Your credit score plays into a lot when it comes to your finances and it is best to get a good grip on the basics early on. This will save you hundreds of thousands of dollars throughout your life. Here are some great tips on building credit after graduation.
#1 Start Paying Your Student Loans
We know there is that six month grace period after graduation that essentially gives you some time to get on your feet with your career before the payments kick in, but if you can start paying something on these before then that is great! Since student loans are considered a form of debt these loans are taken into account as part of your credit score. Do not be too concerned over the amount of loans you are currently carrying, instead be conscious of making timely payments each month.
#2 Know Where You Stand
We cannot stress the importance of knowing where you stand when it comes to your credit score and report. You want to make sure that all the information on your report is accurate and if there are any marks on your report that are inaccurate you will want to dispute those. You do not want a derogatory mark on your credit report to hinder you from a better interest rate on your car loan or even a mortgage loan, especially if it is inaccurate! You can access your credit report by visiting a site like Credit Karma or Annual Credit Report.
#3 Start Building Your Credit History
Have you ever heard someone say that you need to build your credit and the best way to do this is to get a credit card? Yes, it does seem counter-intuitive but it is difficult for credit bureaus to determine your creditworthiness without consistent payment history that specifically surrounds that of a credit card. Another way is by acquiring a car loan, although, without some sort of credit this can be more difficult to obtain. A low balance credit card is a great option for new graduates who do not want to rack up debt. Keep your balances low and make timely payments and your history will begin to develop.
#4 Find the Best Credit Card for Your Needs
While staying on the topic of credit cards, you will want to find the best credit card to suit your specific needs. There are many credit card issuers who offer cards geared toward new applicants with little or no credit history, you might have a better chance of getting a card at a credit union. Another great option is getting a gas credit card or a department store card as these are typically easy to get approved for and are a good place to start if your options are limited. If you have damaged credit another option may be to get a secured card. These cards work like a regular credit card except that you place a security deposit with the credit card issuer to obtain one. These do typically require a larger deposit ($200 or more) and then that amount becomes the line of credit for the account.
#5 Use Your Credit Responsibly
If you have a credit card that you have obtained, it is important to use it responsibly. If you want to keep your credit score high you will need to spend responsibly. This means that you do not use more than 30% of your available credit ($500 limit, don’t spend more than $150 on the card) and pay it off or pay a good chunk of it each month, on time! Your payment history contributes to 35 % of your credit score so it is important to keep up with these payments.
Remember that building credit takes some time and it is important to be patient throughout the process. You can be assured that when you have reached that magic three-digit number, also known as your FICO score, you will be happy to see how much difference it makes when it comes to payments and interest rates on things such as car loans and mortgage loans. If you would like more information on obtaining a mortgage loan or just want to know a little more about the process we would love to hear from you. You can contact us here for more information.