One year ago in July 2019, I had no idea what credit was and how to start my history. I never learned financial literacy in school and my immigrant parents were still learning through trial and error. I come back to you now a credit intermediate.
I applied and was approved for a Discover credit specifically geared for college students. When I started, my credit line was $500. Now, it is $1700. I also have a credit score over 740.
From knowing absolutely nothing about credit to where I am now, these are the things I learned since last July. But before we jump in, I recommend you read the post I mentioned credit in “Things You Should’ve Learned in High School” first.
Types of Credit
Loans (ex: student loans), car notes, apartments/mortgage, credit cards, etc. All different types of credit. Turns out my loans were my credit accounts before I even got a credit card. One way to improve your credit score is to diversify your credit accounts.
Credit Utilization
This played a major role in getting my credit score to where it is now. This was a super confusing topic for me to learn about, so I’ll explain it simply. Only use 30% of your credit line maximum. For example, my credit line is currently $1700, so I won’t dare have a balance of $510. I constantly pay off my card whenever I make purchases before it gets to that amount.
If you ain’t got it, you ain’t got it
Don’t buy anything with your credit card that you can’t afford with your debit card at that moment. Seems obvious, but things happen. One piece of advice I was given a year ago was to use my credit card in place of my debit card, but I think that can be a trap into spending money you don’t have when you’re using money that isn’t yours. If you don’t have the money to get food with a friend in your bank account, you might spend the money on your credit card and think “I’ll pay it off when I get paid”. Instead, I try to only use my credit card for necessary and regular purchases, like groceries and my bills. You know, the things I’d have to have to money for in my bank account anyway.
Pay it OOFFF
Simple. Don’t pay the minimum. Pay off your balance. You can afford it, right? You didn’t spend money you didn’t have, right?
Patience, child
Be patient because it takes time to build your credit history. With good practice and time will come a better credit score.
In conclusion, credit is high key a scam. I mean why does my credit score take a hit when I finish paying off a loan?? Nonetheless, we all have to play the game so we can get those big purchases in the future, like our dream homes and cars.
Carpe Diem Challenge: What can you do today to push yourself towards leveling up financially?