How to build your credit score from Zero!
Credit cards are not your enemies”
I have always been scared of the word “Credit Cards”. The idea of owing money to some bank was not what I wanted. However, when you are in the US, credit scores are part of your identity as a trusty individual. Credit score is a way to measure your worthiness as a borrower, and as a renter. They use your credit score information to decide whether or not to lend you money, and how much to give. Having a good credit score allows you to get a lower interest rate, and/or a higher loan amount. It is not only limited to banks and landlords. Insurance companies, mobile phones companies and government agencies also utilize the credit score system in their data base.
2 weeks before my graduation, I was looking for apartments to live in, and all the apartments I was looking at were requiring a “fair to excellent” credit score. Even if I opened a secured credit card, that allowed me to build my credit in 6-12 months, it was too late for me to use my credit score for my rent. Keep in mind that for the first 6 months of starting to build your credit score, you will not have any credit report and may show as “0”, zero in the system. Be proactive 😅. Luckily, the landlord at the time was very understanding of my situation, and let me move-in without a credit score to show.
The idea of a secured card is to put down a certain amount of money as a security deposit, and you will get a credit card with the same limit amount. After 6-12months of paying down your credit card, and not having any late payment, they give you back your deposit; you now have a credit score and a credit card. At the end of that year, they change your card from a secured card to a normal credit card.
You have many options for secured cards (9 best secured Credit Cards from Nerdwallet Dec 2019). I decided to go with Discover.
Discover It secured:
To start, you will need:
First name, Middle Name (Optional), Last Name
Address + Zipcode
If you are a student or not
Total annual gross income, monthly housing/rent
If you have a checking account or debit account, a saving
Date of birth and Social Security number
To see if you are pre-approved, follow this link: Click here.
By clicking here (my referral link), get a $50 Statement Credit when you make your first purchase within three months. Then, earn rewards with every purchase after that.
It took me approximately 6 months to get my credit score to a good range, and my deposit back. After 3 years, I still have the same credit card, my card limit has been increased. I only make sure to put my phone bill in it to keep the card running and paying it in full at the end of the month. Paying your balance in full at the end of the month is really important to get a good credit score.
Credit Cards are not evil, if you do not overspend. If you do not have the money in your saving/debit account, don’t use your credit card to purchase anything. If you do, and it gets out of hand, you are now in debt, which I do not think is what you want. You then become a slave to the bank company.
Also, read your terms and agreements before accepting getting a credit card. Understand the fees and the interest charges that they will add to your balance if you do not pay your card in full. Banks are sneaky and they do not like to lose money. Be sure to be prepared for this journey: credits scores and adulthood.
Ps: Credit Karma is a free platform to check your credit report. They give you information from two credit bureaus: TransUnion and Equifax.