I first got my taste of the adult world at the age of 18. After joining the military, and receiving my first Government credit card I was inundated with offers to get credit with loans, credit cards, and store cards. It seemed like a dream. I would get an offer, then I would accept it. Get another offer then accept it. Without even knowing how this could affect me I frankly didn't care. After accepting every offer that came by my four years in the military went by. As soon as I got out is when the trouble started. After defaulting on cards left and right, at the time I didn't think it would hurt anything, I was denied for my first apartment back home with my family. Confused I went to a VA clinic and sat down with a financial advisor who went over my credit score. This is when the seriousness set in.
Usually people think "oh credit cards are good they build credit as long as you pay the minimum monthly", or "maxing them is fine just pay minimums". So not true. Maxing credit cards can get the company to send notes to the reporting agencies stating that you max your cards frequently this causing you to look bad even if you are paying the minimums. This is a huge no no. I realized after many meetings that I was doing things very wrong. Here are some dos and don't that have helped me raise my credit score from a dismal 440 to 640 in a little over a year.
Get a credit card. Only use the credit card once every 3 months for a full tank of gas. Then pay it right away. DO NOT MAX YOUR CARDS. This reflects badly on you...
Credit utilization is huge. Only use up to 1/4 of your credit cards max credit line. Example if your credit card company gives you $500, which most with little or no credit will, DO NOT go over $125. Credit utilization is one of the key identifiers for credit score this will reflect badly on you if you have bad utilization...
DO NOT keep accepting credit cards. Remember too many credit cards can be just as bad as too little credit. If you are going to look for credit options a financial advisor told me during a housing seminar that batching credit offers, signing up for credit offers all at once within a few days, is better than doing a lot of offers over a few weeks. Credit cards and other credit go as hard inquiries on your credit report. These are usually viewed as a red flag to creditors. Too many make you a bad candidate. If you have too many, Check Credit Karma for free, then wait 90 days for Hard Inquiries to drop off before attempting any more credit offers.
DO NOT keep your credit cards on you. This tempts you to spend. Keep it in a draw, freeze it. Then use it every 3 months to show that you are still active. I know emergencies come up, but try other methods before you try to use these. Remember car loans reflect well on your credit, but not as well as credit cards.
Try to stay away from store cards. These tempt you to spend. If you are going to get one get one that ONE reports to credit agencies, and TWO is for something that you never buy. These can be good, but the APR's are usually terrible. Having a card for a store that you never use will help you to never spend on it. Use it for something around the $20 range every few months. Then pay it off right away.
I am getting to the point where I want to save for a house in my future. I was given this finally advice from a friend.
Trying to save money for a vacation, apartment, house, or new toy?
Open a bank account to a bank that is separate from your current bank. Somewhere you never go to or won't after you have the account first opened. DO NOT GET THE ATM/DEBIT CARD OPT OUT OF THIS. Direct deposit $20-$30(or more if you can) into this savings account. If it's direct deposited you hardly see this. Unless you look at your check. Most of the time you don't even see it missing. By the end of the year you will have $720, biweekly pay or $1440 weekly pay, saved without even trying too hard. It may not seem like a lot, but it is a savings nonetheless. You can start at $20 per check and slowly increase, but as my friend mentioned most of the time once you do a secondary direct deposit you won't go back to do another.
Hopefully this helps some people. It has helped me tremendously. Too bad high schools didn't teach you about credit, and balancing check books. This would have been an amazing class to set us all up for success.