My journey through the world of credit has probably been a lot like your yours, starting small with a student credit card that had a tiny limit of $500, and managing, eventually, to buy a home. The typical credit journey can be one of perilous dangers and pitfalls, but with the right approach, those can be avoided relatively easy.
Come along with me and I'll give you an idea of what it takes to build your credit and use those lines of credit for the everyday shopping that everyone has to do. My credit journey is about treating my credit report with respect and doing everything in my power to not bury myself in debt. If you're anything like me, then while you enjoy treating yourself to the nice things in life, you make sure to do so responsibly.
While my journey started with a student credit card from a large nationwide bank, a lot of folks start their credit journey with store credit cards. These cards are issued by a bank and then the retailer will slap their name on there and usually provide some perks. I did not start my journey with these because of the much higher interest rate that usually comes with these cards.
Store cards are not inherently bad, I did have a credit line with a furniture store that gave me six months of no interest. The problem was that, once that six-month period as over, I would be subject to 27.9% interest, dating all the way back to the original purchase date. Let's just say that I paid that one off as quickly as possible.
Should you use store cards in your credit journey? Well, it really depends on what you are shopping for and whether or not you can get a no interest deal, like the one I experienced. These cards are also relatively easy to be approved for; just be careful and don't let their high interest sneak up on you.
Buying a Car
Cars seem to be a fundamental part of American life, as we travel to and from work or tend to all of the errands in our daily lives. Unless you are a master saver, usually these cars need to be financed. On my journey, after I had built up my credit a bit with the student card and one other, I felt I had enough credit history to finance a new car.
This was an exciting prospect and my mind swirled with possibilities. Being a young man, I dreamt of sports cars and speed, but the reality was that I needed basic transportation and my wallet could only handle so much.
The result was a brand new 2001 Nissan Altima, and a sensible choice was made. My impeccable credit history meant that I got a great financing rate. This is a major reason you should always be on top of your credit report.
Buying a Home
After years of meticulous curating of my credit, I felt it was time to purchase a home and put roots down. This would be the largest purchase so far in my life, and once again my mind swirled with the prospects of mansions and pools. Once again my wallet screamed mercy and I settled on a two bedroom/one bath ranch for $103,000.
This does not mean that I won't get something more expensive later, but it does mean that I am not going to stretch myself thin. My credit is important to me, and the monthly payment of all my bills combined is less than 50% of my take home income. It's important that I always stay ahead.
My Future is Bright
The more I use and pay off credit lines and cards, the more I see a brighter future ahead. While responsibly building my credit and showing creditors my worthiness of ever-increasing credit lines, I have an endless ability to pick the cards, rates, or loans of my choosing. It feels good knowing that I can be approved for anything I need.
I hope that you can have a journey like mine and find that, with responsible shopping, you can build your credit too. I can use my cards to pay my bills and get rewards back for doing so. As long as I pay them off and on time, my credit future will remain bright.