Your credit score is what lenders look at in order to determine your ability to repay a loan. It is the culmination of all of your financial decisions. All of them, both good and bad, are represented by this one number. It’s affected by things like the total amount of your debt, whether you’ve been responsible with paying it back. Whenever you apply for a mortgage or car loan, you can be certain that the bank is taking a good look at your credit score, but it’s more than just that.

Credit is often used to assess someone’s trustworthiness. If you’re looking for a place to rent, chances are that your prospective landlord will take a look at your credit. Likewise, many human resource agents will pull up a copy of an applicant’s credit score in order to glean some insight into their character and sense of responsibility.

The Importance of Building Your Credit Early

Considering the significant effects that credit can have on your life, its importance is unquestionable, yet so many teens and twenty-somethings don’t seem to make it a priority. You can’t place the blame solely on their shoulders though. The older generations spread have spread quite a few misconceptions around about credit.

For one thing, many of them seem to think that credit cards are something that the youthful ought to stray away from. That’s a piece of advice that everyone in their twenties has heard from their elders at least once, and it’s not completely wrong. If you’re planning on treating your credit card like your own personal U.S. Treasury printing press, then you shouldn’t even consider getting one. That kind of recklessness is a great way to set yourself up for painful financial hardships.

But not everyone in their twenties lacks self control, and for those that can handle such responsibility, building credit early is a great move. It’s one of the best things you can do to ensure a bright future for yourself. Take whatever opportunity you can to increase your score. If you pick up simple habits such as never missing payments or paying your bills with credit cards at a young age, your credit score will naturally rise overtime. It might not seem like much, but adopting best practices like these shows lenders that you are the kind of borrower they can trust.

So, when you next hear the advice to steer clear of loans and credit cards, interpret it as a cautionary warning. And as long as you heed that warning and approach the situation the right way, your new, high credit score will leave you in a good place for the long haul.

How You Can Build Your Credit Score

The simplest and most common way of building credit is through the responsible use of credit cards. The key word there is “responsible.” It’s easy enough to get approved for a credit card. That’s no special feat, but keeping your creditors on your good side takes a good bit of work. You can’t go over your limit. And don’t even think of ever missing a payment! Don’t even let yourself send it in a day late. The penalties for these mistakes can be severe and very damaging to your credit score.

If it sounds like too much work, don’t worry. Most credit card companies give you tools to help you from unintentionally making any mishaps. As long as you keep a mental tally of your charges or even jump on the website to check your balance, you should be just fine. Ultimately, the reward will be worth all the work in the long run.

Choosing the right card for you is a job in itself. The variety of cards available is overwhelming to someone just becoming familiar with how credit works. If you have no credit, then your first card is going to have strict limitations. The limit likely won’t be more than $500, and the penalties for missing payments would be severe. Once you’ve proved your stewardship with a basic card, you’ll be able to move up to better offers.

While constant use of credit cards is the most common method of credit building, it isn’t the only one. These other options come with less risk as they allow you to offer collateral against your line of credit. The best choice for you will depend on your current credit score and your financial situation. If your credit is already very poor, then you might not qualify for any of the credit cards you apply for. Instead, you might be forced into alternative credit building methods such as passbook loan or credit builder loans.

Every creditor loves the opportunity to lend to someone they can depend on. That can work in your favor in a big way, especially if you have built a long history of good credit. That’s why you need to start early. With a little attention and effort, you can set yourself up for a strong financial future.