Taking a credit card at an early age is important because it prepares you for many firsts, such as your first apartment, first car loan, and first job. A good credit history is more than just being able to make purchases with your credit card. As a truly independent adult, you need to be able to rely on your creditworthiness for everything from obtaining cell phones and utilities on your behalf to qualifying for the best car insurance rates.

Credit ratings play a big role in whether an application gets approved or not. It will also determine what your interests are and whether you will be asked to submit additional collateral. Landlords can check your credit score when approving a housing application. This is very important when buying your first home. Potential employers consider your credit history, but not your credit score when looking for your first job.

Building trust while you’re young and learning how to use it wisely will make the transition to adulthood much easier. You may be more concerned about his SAT score than the three-digit number, but it’s pretty simple. Starting to work on your credit score at a young age will set you up for success for your older self.

Lenders see your creditworthiness as your chances of being able to repay without defaulting. You ask yourself, does this person deserve credit without risk? When you open your first line of credit, such as a credit card, you actively improve your creditworthiness.

When it comes to calculating a credit score, scoring models such as FICO consider payment history and the amount outstanding to be the two most important factors for good credit. If you can consistently make on-time payments and keep your debt-to-debt ratio low, you’re set for success.

Tips for managing your first credit card

Credit cards are a convenient way to build trust, but your new journey with plastic shouldn’t be taken lightly. Irresponsible credit management delays the goal of building good credit and defeats the purpose of starting young. When it comes to credit, having a realistic idea of your intentions is a great way to approach your finances. So here are some tips to keep an eye on.

Set up a budget

The 50/30/20 law states that 50% of your net income should be spent on basic necessities such as housing and groceries, 30% or less on things you don’t need but want, and 20% or more on savings and debt. We propose to use it for repayment check your credit card statement regularly to calculate how much you can afford and track your purchases. This keeps your budget under control and avoids credit card debt.

Set up automatic payments

To set up automatic credit card payments, you must be logged into your account online or through your card issuer’s app. Once logged in, look for the option to set up automatic payments and follow the prompts. You must provide your bank account information and the date you would like your payment to be processed. With automatic payments set up, your credit card bill will be paid on the same day each month. This saves you from having to remember when to pay your bill each month.

Only charge what you can pay off in full

Credit cards should always be treated like cash. If you can’t pay off your credit card in full, it may be time to stop stealing. Credit utilization, or the amount of credit limit you use, has the second largest impact on your credit score. When you run out of credit cards, your score may drop and you may be ready to incur credit card debt. Using less than 30% of your credit limit usually gives you better credit, but always try to pay off your balance in full.

Pay more than the minimum

If you pay only the minimum amount on your credit card bill each month, you’ll end up paying more interest. A portion of your payment will be applied to accrued interest, so your balance will only decrease slightly each month. Pay off your balance in full each month to avoid paying interest. But if you’re tied up and can only pay the minimum amount, that’s fine. Paying the minimum amount is always better than paying nothing at all (this will damage your credit score).

Review your credit card statement each month

You should review your credit card statement monthly to identify any errors or unauthorized charges. If you find any of these, report them to your credit card issuer immediately. Most credit cards come with a zero-liability guarantee. This means that you will not be held responsible for fraudulent charges.

Conclusion

Getting a credit card when you’re young can be very frustrating. Because lenders see you as a risk if you don’t have an established credit history. It may seem counterintuitive, but honestly, it can.

However, it is not impossible. Start your financial journey head-on by becoming an Authorized User or applying for a secure credit card. When the time comes, that good credit you’ve been working on since he was 18 will carry you to your own unsecured credit card.