I’m 20 years old with no credit whatsoever. I’ve never financed anything, and the only bank account I’ve ever had was a basic checking account. I make a bit over 40k a year, and my goal is to buy a house by 22. I have no idea where to even start building credit or how I can reach my goals quickly; advice is very much needed and appreciated. Thank you all in advance.
Try getting a card with your bank.
Discover is the best entry card.
Zinnia said:
Discover is the best entry card.
Agree. I started with a $200 secured card. A year later they gave me $1000 total and 6 months after that $3600 total.
Get a secured card with your current bank (if they offer it). Put however much money you can afford to be without for 6 months into the savings account they base your credit limit off of. Apply for another card or two after they convert your secured card into a regular credit card. Ask for increases every 6 months only if they do a soft pull (not a hard inquiry); otherwise, ask as needed.
I opened a TD secured credit card, they converted it after 6 months, and over the past 5 years they’ve doubled my limit 3 (about to be 4) times without me asking. They even recently upgraded it to Visa Signature status, so there are some good perks associated too.
The hardest metrics to hit are credit age and credit mix, due to time constraints. You can force 100% on-time payments and <10% utilization easily enough if you’re careful. Unfortunately, credit age is one of the hugest factors when determining your eligibility and APR for secured loans like auto and home. Best bet is to get a good mix of cards early so that in the future when you open new accounts, your average credit age doesn’t go down too much since you have multiple cards to offset the average.
@Obed
This is the best advice, OP.
If you have money in your bank, apply it with your bank. Your bank will approve it, and also the credit limit should be higher because you have a savings or a checking with them.
Try the preapproved Cap One Savor; it covers dining, grocery, and entertainment.
Secured cards are probably a good way to start if you can’t get a credit card outright. Good luck!
Three words - Secured Credit Card.
It’s how most of us started.
Start with a Discover It card - do a charge card.
If you have a checking account and a regular direct deposit, your bank may approve you for a card with a small $500 credit line.
When you open a credit card, be sure you pay off your card in full whenever you use it. Don’t let it go past the statement close date and NEVER past the due date.
When you get a car, save up and buy a car that you can pay for outright. Don’t finance a car; otherwise, you’re paying thousands in interest.
Stash your money in a high-yield savings account so you can earn 3-5% interest, as opposed to ~0% interest from a traditional bank.
If you have a friend or family member with great credit lines who has never been late on payments, consider asking them to add you as an authorized user. You’ll benefit from their credit limit and history for that specific card (you won’t impact their overall score because you’re only being added to that account). This will boost your credit in under 45 days.
When you apply for credit on your own, the card companies will see your credit history and usually extend similar limits. You will want a score of at least 720 for better rates when buying a home, but you won’t go wrong starting off strong with someone else’s history.
Buy authorized user tradelines to temporarily boost your score. Then go on a credit card application binge, focusing on secured cards.
You can ask a friend or family member to add you as an authorized user on their credit account. As an authorized user, their responsible credit card usage can positively impact your credit score, even if you don’t use the card yourself.