Building Credit in Your 20s

By : Maricor Bunal

Are you a twentysomething planning to achieve financial security? Well, it all begins with your credit score. If you’re currently living through the financial struggles many 20-somethings are all too familiar with, don’t be worried. Instead, think of your situation as an opportunity. You are actually in the best position to build credit.

Take the following steps to start building credit before you hit 30.


  1. Think before you spend

This first tip should go without saying. After landing your first full-time job, you might be tempted to spend your paycheck without a second thought. However, this will only set you back. I recommend living on a tight budget for at least half a year so you can set aside a good chunk of your income. Give yourself time to adjust to your salary and figure out how far it can take you. Six months is a reasonable time to figure out your expenses and separate your needs from your wants.


  1. Focus on your credit score

You can be more diligent and committed to saving money if you have a healthy credit score. Lenders will also be more open to offering you lower interest rates if you’re a low-risk borrower.

To build your credit score, find the best credit card that fits your spending habits and open a starter credit card account. Always be ahead of your payments to establish a healthy credit history.  On-time payments are crucial to a strong credit score so make sure not to miss any. It helps to schedule email and SMS reminders for the due date. Automating your payments is also a smart move.

Just remember not too be too hasty about spending to steer clear of copious amounts of debt.


  1. Don’t be in a hurry to pay off loans

Most loans typically have low interest rates, so don’t worry about them too much. If you try to pay them off as soon as possible, you won’t be saving a fortune. While it’s certainly smart to keep up with loan payments, it’s much better to prioritize your savings.


  1. Be prepared for your retirement.

Every payday, set aside an amount for your retirement. No matter how small it is, it will make a big difference when you’re older. Your 20’s is without a doubt a great time to start saving up for the future because you’ll have decades for compound interest. Your money will grow over time.


  1. Be prepared for emergencies.

Many people end up in debt because they lack an emergency fund. To shield your finances from unexpected bills and copious debt, keep some money in an emergency savings account. Don’t be afraid to start out small and slowly grow your savings. When an unplanned expense comes, you’ll be able to stay on track with your savings and keep building credit.

Developing good money habits in your 20’s is a vital step towards ensuring your financial stability when you’re older. Build credit while you’re young so you can look forward to reaping its benefits in the future.

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