credit history at 18

How to Start Building Credit History at 18

Finance or money is a subject that is not taught in our school, but it plays a major role in our lives. Once you are past schooling and education, the next step phase of your life is ‘job.’ You will get a job with a good company or organization and start earning money. However, in the next few years, you will struggle with money and face difficulty managing it because you never learned how to manage it.

The next difficulty is with credit. Many people think of credit as a risky gamble; therefore, they tell others not to get involved with credit. As a result, when you apply for a loan later in life, you can face difficulty because you don’t have any credit history.

If you are in your 18, this article will tell you about credit, loans, short-term & long-term loans, Instant funding online loans and what you can do right now to start building your credit history. Let’s familiarise you with financial terms.

What is credit?

Credit means you borrow money from a financial institution, friend or family. Basically, it means to borrow money or resources with a promise or agreement to return it with or without interest after a specific amount of time.

What is credit history?

Credit history is a record of all your past credit. It contains information regarding the loans you took until the present day. A good credit history means you have paid your loan at the right time without making any faults or defaulting on your payments. Whereas, bad credit history means you have made faults in your past loan by not paying on time, delaying payment, or other reasons. On an average, it takes 18 months in Canada to create a fine credit history.

Who keeps track of our credit?

Whenever you take a loan or credit, the same is reported to the credit bureaus of Canada. There are mainly 3 credit bureaus in Canada: Equifax, TransUnion, and Experian. Your creditor reports all the transactions to the credit bureaus and they create your credit file, which contains all information about you and includes credit history.

How is credit measured?

After a thorough analysis of your credit file, certain points or numbers are given, which creates your credit score. A credit score ranges between 300 to 850; the higher the number, the better overall credibility. A credit score is one of many factors and one of the important factors banks check before approving your loan application.

What are online lenders?

Online lenders are financial institutions that provide bad credit short-term loans in Canada instantly. Unline banks, they do not take days to approve a loan. These lenders provide instant loans to assist you in emergencies. They offer short-term loans to Canadian citizens.

What are short-term and long-term loans?

Loans that are provided for a time period between 2 years to 5 years are short-term loans. In comparison, loans with a payback time between 5 and 20 years are long-term loans.

How to build a credit history?

instant short term loans in Canada

To build a credit history, you need to start taking credits and loans and ensure you are paying them back on time. When starting with credit, you may face some difficulty getting credit. Therefore, you can try the following methods to build your credit history.

  • Apply for a secured credit card or loan
    • When you are starting to build a credit history, banks won’t give you loans or credit cards straight away. So, to get approved need to keep collateral with them to secure your credits.
    • For example, open an account in the bank and keep an amount equal to the credit card’s maximum limit and apply for a credit card or loan against that amount. This way, banks have security in their hand. If in case you default on your credit card payment, they can debit the amount from your bank account.
    • As long as you pay on time, they won’t deduct any money from your account. This will allow you to build your credit score and credit history.
  • Set a usage limit to your credit cards
    • When starting to use credit cards, it gives you a feeling of owning the money, which in reality is not true. Often new novice users make this mistake who do not take time to educate themselves. Many investors and finance experts recommend using 30% of the total credit limit, contrary to the beliefs of using 100%.
    • The reason why it is recommended to use 30% of your total spending limit is that using 100% gives an impression to the creditors that you may not be able to pay the amount or increase the risk of making default, resulting in a fall of your credit score.
  • Pay on time
    • When you have issued a credit card or have taken a loan, there is a fixed date in a month when you have to make a payment for the expenses you incurred in the past month. Therefore, ensure you pay within the time limit offered by the creditor to avoid late payments and delays.
    • One important thing to note is that credit card providers often offer you an option to make a partial payment of the total amount and pay the rest later. This is a great option when you look at it.
    • For example, your credit card bill was generated for $500, and they asked you to make a partial payment of $50 to continue using your credit card and pay the remaining $450 later. Let’s say the next month your bill was again $500 and include the previous month’s pending amount total becomes $950, add on the interest. The total crosses $1000. Next, they will again offer you a minimum payment to keep your credit card active.
    • This repeated chain creates a debt trap from which it becomes difficult to get out. Therefore to avoid falling for this trap, set an amount that you actually have and can afford to pay when the bill is generated. And always remember to pay the amount in full.

Wrap up

These are some main points that you need to keep in mind while building a credit score at 18. Of course, you can also take short-term loans from an online credit lender in case of emergencies or shortcomings. If you enjoyed reading our content, share it with your friends and help them learn more about credit.