Getting a credit card relatively early in life, and then using it responsibly, can help you build a solid credit history. This relatively simple move can provide you with a respectable credit score that can translate into major savings. On the flip side, it can cost you significantly over the course of your life to have a bad credit score, or not have a credit score at all.
Consumers should be aware that their credit score is a major factor when qualifying for a loan, renting an apartment, or even getting hired for a job. Additionally, a credit score impacts how much consumers pay in interest charges, for insurance, and even for cell phone contracts.
There are a number of groups you will encounter during your lifetime that will pay close attention to your credit score. Making a good impression through consistent, conscientious use of your credit cards will build a credit history that they will find impressive and will help you save money.
Lenders make up the primary group who look at credit scores. For lenders, a good credit score can translate into the best rates on a credit card, mortgage, car loan, or small business loan. Meanwhile, without a credit score, qualifying for a loan or credit card might be impossible.
Insurers will also consider you credit score -- among them the majority of auto insurers as well as home insurers. According to a recent Consumer Reports survey of eight popular auto insurers, it was shown that drivers with the highest credit scores could pay as much as 31% less on their premiums than if credit scoring wasn't considered, while drivers with low scores would pay up to 143% more than if credit scoring wasn't considered.
Meanwhile, landlords are increasingly deciding whether to rent out apartments based on the applicant's credit score, since they see a credit rating as a way to determine whether you pay your bills on time. Without a credit score, or with a low credit score, you could end up needing to find a co-signer for your lease. Alternately, you might end up being asked for a higher rent or security deposit.
Job applicants may find that their potential employers give them notice of plans to look over their credit report, with the Society for Human Resource Management reporting that 35% of employers pull credit reports on potential hires. Employers may consider bad credit to signal irresponsibility, or they may worry that employees with financial problems will be distracted while on the job.
Nowadays, even your cell phone provider may use a look at your credit report to guarantee your reliability when it comes to bill paying. With a poor credit history, that could mean you do not qualify for the best cell phone rates. Separately, you might have to pay a deposit, or you could get refused a contract.
So what's a consumer to do in order to build the best possible credit history? Students may want to apply for a student, using the credit card to occasionally make purchases, then paying off the balance every month. It is often easier to qualify for a credit card while in school than after graduation, since credit card issuers assume that parents can lend a hand if their child gets into too much debt.
For those adults who are not in school or are wary of applying for a full-fledged credit card, a secured credit card like the New Millennium Bank Secured Platinum Visa or MasterCard can help them begin building a credit history. After a year of on time payments with a secured credit card, you should have enough credit history to get an unsecured credit card and get your deposit on the unsecured card returned.
There are a number of credit cards for people with bad credit that can also help you to start building or improving your credit history.
Even if you do intend on applying for a loan, renting an apartment, or getting an insurance policy sometime soon, by building a solid credit score now, you have it when the time comes that you need it.
After all, someone who starts their credit history early and makes payments on time, never maxes out their credit cards, and pays more than the minimum balance each month can end up paying thousands of dollars less down the road than a similar consumer who is irresponsible with their credit.