The “winner’s circle” symbolizes the ultimate achievement in sports. In racing, it’s the place where the drivers celebrate their victories with gold medals or trophies. Just like winning on the race track, building a strong credit history requires determination, strategy, and perseverance. Keep reading to discover the importance of building credit for the future with insights from 23-year-old race car driver Courtney Crone.
1. Establish your credit history
“Establishing a good credit history and managing your finances efficiently are crucial to the success of your finances. This ensures that my financial goals align with my passion for racing.”
Building your credit from the ground up may seem challenging. Lenders typically prefer to see a solid credit background before lending you any money. However, in order to develop a strong credit history, you need to begin with some form of credit. While it may seem complicated, having credit can be necessary to achieve your financial goals. Here are some straightforward options to establish your credit history when you’re just starting out:
Apply for a student credit card
A student credit card that does not require a credit history or credit score might be a good option for a student who has never had a credit card and is new to managing credit. When you apply for a student card, it typically offers a low initial credit limit. This will allow you to learn how credit cards work without the risk of accumulating a high amount of credit card debt. Another option for beginners is a secured credit card, which requires you to provide a security deposit to the credit card issuer. With either card, you can make purchases, pay off your balance, and demonstrate your responsible credit usage.
Get a credit builder loan
Credit builder loans are specifically designed to help individuals boost their credit scores. Unlike personal loans, credit builder loans are available to those with little to no credit history. By making consistent, timely payments on the loan, your payment history will be reported to the credit bureaus. This helps improve your credit profile over time.
Become an authorized user
Becoming an authorized user on a parent or guardian's credit card grants access to their credit line and card. Responsible usage of the account could help improve your credit score. However, if the primary cardholder misses payments or annual fees, it could negatively impact your credit as well. If you're under 18 or seeking to establish a credit history, being an authorized user on a trusted individual’s card can be a great way to start building credit with a credit card.
Report rent or bill repayments
Many different services allow you to report monthly expenses, such as utility bills, streaming service payments, and rent to a credit bureau. Financial products designed for this purpose, like Experian Boost, can help your FICO score because they demonstrate proof of a positive payment history. The best part about reporting bill payments is that you’re building credit through purchases you have to make regardless.
2. Use your credit responsibly
“Spending responsibly plays a key role in this pursuit. Remember, a good credit score is the ultimate pitstop for financial success.”
Simply qualifying for a credit card or loan is not enough; you must consistently show that you are a good steward of the credit being extended to you. Your credit score, determined by several factors, conveys to lenders if you are using your credit card responsibly and are deserving of additional credit in the future. Here are a few positive financial habits to practice:
Limit unnecessary spending
A credit card gives you access to funds that you might not have had otherwise. Although having a financial buffer can be helpful during emergencies, it may also encourage unnecessary expenses. Try to prioritize your needs over your wants, and limit your impulse purchases. By practicing disciplined spending and managing your credit wisely, you can enjoy the benefits of a credit card while avoiding any potential downsides.
Pay your bills on time
One of the best credit card tips is paying your bill on time. Every month, you’ll receive a statement detailing your credit card balance. You should try to pay the minimum payment before the due date each month or the entire balance if you’re able. If you fail to make a payment by the due date, you risk incurring a late fee and possibly hurting your credit score. Staying on top of your payments demonstrates your commitment to long-term financial responsibility and effective credit management.
Only borrow what you need
When it comes to credit, it’s wise to borrow only what you truly need. With student loans, you can accept the full amount that’s offered to you, but you will have to repay whatever you borrow with interest. The same principle applies to credit cards; you should only charge what you are able to pay off. Borrowing only what you need and keeping a low credit utilization ratio demonstrates to lenders that you manage your credit responsibly.
3. Be patient
“Whether you're a professional driver like me or an enthusiast with big dreams, building credit is a key component of your journey. It takes time, practice, and patience.”
Establishing your credit history is a long-term financial goal. Your oldest credit account plays a role in the overall length of your credit history, which is an important factor in determining your credit score. Because of this, you need to show positive habits consistently over time for your score to continue growing. Here are a few tips for exercising patience while practicing good credit habits:
Avoid opening new credit accounts for a while
Be mindful of how often you apply for new credit accounts. Having multiple hard inquiries on your credit report within a short time frame can negatively affect your credit score. Lenders may view this as a sign of financial distress or irresponsible behavior. Instead, consider spacing out your credit applications over time to demonstrate responsible credit management and avoid a potential dip in your credit score.
Keep your account open and in good standing
As you gain more credit experience, you might think about replacing your credit account with a new loan or additional credit card down the line. However, you shouldn’t close your first credit card account when you open a new line of credit. Instead, consider using it for a small subscription service and setting up automatic monthly payments. Keeping your oldest credit account open and in good standing shows lenders you have a long track record of creditworthiness, enhancing your appeal as a borrower.
Monitor your credit report regularly
While you patiently wait for improvement in your credit score, it’s important to review your credit report on a regular basis. This practice can help you spot any errors and ensure that all information is accurate. If you find any inconsistencies, take action right away by filing a dispute with the credit reporting agency. Resolving issues early can help protect you from identity theft and credit card fraud.
4. Start today to be ready for tomorrow
“Creating a good track record with your money, using your credit card responsibly and paying your bills on time determines how fast you can go when it's time to make big moves. You’ll feel confident when you’re ready to rent an apartment, buy your dream home, or start your racing career like me.”
Beginning your credit journey today sets you up for a more secure tomorrow. Similarly, learning how to build credit in college or earlier helps you make future decisions with confidence. By establishing a solid credit report, it will be easier to qualify for loans with more favorable terms or lower interest rates. Here are some tips to help you think about your financial future:
Remember your future financial goals
Concerns about your credit cards, loans, and credit history can occupy a lot of mental space. Although managing your credit may seem irrelevant or tedious at the moment, your commitment and perseverance will ultimately prepare you to reach your financial goals later. Practicing good money habits with a simple tool, like a credit card, can set you up for success when it comes time to rent an apartment or pay off student loans.
Keep learning about credit
As you navigate your financial journey, it's important to educate yourself about the different types of credit and how they impact your overall financial health. Revolving credit, like a credit card, offers flexibility but requires discipline to avoid high-interest debt. Installment loans, such as auto loans or mortgages, involve regular monthly payments and can help build a solid credit history if managed responsibly. Striving to learn more about your finances and credit will help you feel more confident in your money management and decisions.
Don’t let mistakes consume you
Alas, it’s almost unavoidable that you will make a money mistake sometime throughout your life, but it’s important to not let it consume you. Regardless of whether the error is big or small, you shouldn’t allow this setback to disrupt your financial progress. When you’re younger, you have more time and opportunities to recover from money missteps compared to later stages of life.
No matter where you are in life, it's never too early to begin building your credit history. Whether your dream job is to be a welder, museum curator, or motorsports fanatic, you shouldn’t wait to establish credit until you need it. Like racing, there may be plenty of bumps or detours in your financial journey, but starting to build credit early can pay off greatly down the road. With that, we’ll leave you with this final note from Courtney:
“From race car driving to the career you ultimately choose…it makes sense to be credit responsible, to have the choices you want, and to help you realize your dreams. Start building your credit today with the Student Credit Card from 1st Financial Bank USA and stay on track to achieving your financial goals. See you in the Winner’s Circle!”
