In your 20’s, obtaining credit can be fairly easy. Credit cards, auto loans, and department store charge cards are fast, available and convenient. The reason credit is so easy to obtain in your 20’s is because you haven’t (yet) had the time to tarnish your credit record. Your credit score may not be the highest – but that’s due to the fact that you haven’t had the time to build an extensive credit history. Maybe you’ve been in college or still living at home – and you haven’t had the need to develop your credit history. The fact is: obtaining credit in your 20’s may be easy… but ruining it can be just as simple. Read on to learn how to gain – and keep – good credit.
The opportunities to launch your credit history while going to school and living at home (or still under the parental “roof”) are many. The reasoning behind this fact is simple: credit card companies and banks find the parental safety net extremely attractive. From their perspective, you’re a safe bet for repayment. If you get into a bind, your family would be more apt to help you stay afloat than to allow your credit to be tarnished. This can be a great way to initiate your credit history, if you’re in a position to be diligent about repayment. If you’re living at home as a student, or even living with family to save money, set aside funds to buy your first home, or get on your feet after college, establishing credit accounts can help you move toward financial stability. Working toward creating a healthy credit score means establishing credit, as well as working to build a solid history of regular payments with progressive increases to your credit limit.
According to Kiplinger’s, working-class adults in their 20’s have more difficulties obtaining credit. Why is credit harder to obtain? While 20-somethings who are fully self-sufficient may have jobs to support a credit card payment or two, they are viewed as lacking a solid support system should they default on their debt. If you’re having trouble establishing credit, start with the foundation of a bank or credit union account. Once you’ve established a bank account, apply for a bank or credit union credit card, or a retail credit card. While these cards aren’t the best way to go, (due to high interest rates) they are fairly easy to obtain and will help build your credit if handled responsibly. You can build a credit history in 6 to 12 months by making purchases and paying your account balance off in full each month. While some personal finance guru’s advocate making the minimum payment and carrying a balance over the course of the year, the fact is that if you initiate a credit history and come away with zero credit card debt, you still look better on paper (in the long run) than if you carry a balance, accrue interest, and find yourself in debt over the course of that first year.
Keeping the Faith
Maintaining good credit is a skill which will follow you through your single days, to the career years, and even through parenthood. Ruining your credit is easier than obtaining it in the first place: intentionally blow off a few payments and you’ve created a blemish on your record. Totally default on the account – for whatever reason – and you’ll find the reporting agencies to be less than lenient. If you find yourself out of work, laid off, or downsized from the job that your credit was originally based around, your first action should be to contact the credit card company and explain your situation. The card-issuing agency may have a program to keep you on track until your financial difficulties subside. Off-setting payments may not be optimal in the grand scheme of things, but this tactic is still better than avoiding the situation entirely.
Attaining credit is an important part of moving forward with your life. As your credit history grows, moving from higher-interest credit accounts to a low-interest credit card will serve to further establish your credit and raise your credit score – as well as allow you to save money on the interest paid on any balance carried on the account.