Strange as it may sound, plenty of modern consumers don’t fully appreciate how credit works or how best to accumulate good credit history. As such they often have difficulty making big purchases or successfully applying for loans. Indeed, nearly a quarter of millennials still rely on their parents for some form of financial support. So what gives? Why are people have more trouble building credit, and how can you reverse the tide and make sure you don’t end up fighting a losing battle with your credit card?
Responsible Credit-Card Usage
Unfortunately, when we talk about using credit cards most people tend to fall into one of three categories: subset A never uses their credit card, or doesn’t even own a personal card. Subset B has one credit card (or more) and uses it often, but doesn’t do so responsibly. That is, they spend over the limit and struggle to pay back the balance on time. Lastly, Subset C are the responsible credit-card users; these are the people who use their credit cards in moderation –– enough to build strong credit history, but not so much as to cripple themselves financially. Sadly, this third group of people is surprisingly small. Though there is a certain stigma around credit-card use, there really isn’t much mystery as to how to properly establish good credit.
Getting Out of a Hole
People make mistakes when they’re younger, and that includes unwise financial gambles. The good news is, even if you wrecked your credit in your early 20s, you can still rebuild it relatively quickly. Again, though, there are no instant-fixes to credit. After all, one of the factors banks use to determine your credit score is the amount of time you’ve had and used a credit card. So if you’re attempting to save up for a big purchase, don’t expect your credit to skyrocket overnight; rather, through months and years of smart planning, you can work to rehabilitate a less-than-stellar credit history.
Supplementing Credit
As mentioned above, credit is most vital when making a large purchase –– e.g. a house or a car. However, just because you don’t have the greatest credit in the world, it doesn’t mean you’re out-of-luck when it comes to home-ownership. Indeed, there are a number of lending options, including extremely specific industry-related loans (think doctor home loans, for reference) that can help alleviate folks feeling the credit crunch. What’s more, finding alternative funding methods can help cover costs (both professionally and personally) if you’re trying to recuperate an ailing credit score. The bottom line here is to keep your eyes peeled and be willing to seize opportunities as they arise.
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