I had non-existent credit for 20 years. And then I decided that it would be in my best interest to have good credit. How I was to achieve this was a total mystery to me. And no one could explain to me in any simple way how the damn thing works. But I eventually figured it out on my own.
And now I'm going to share it with you...
If you don't have a credit score, which was my case, then you build credit with an Amazon Prime Secured Card by Synchrony Bank. Of course, you apply for this through Amazon. I almost guarantee you that you will be able to get this card. The Prime Secured Card works very much like a debit card, except you can only use the $150 that you load into the card on Amazon purchases. This is a small price to pay for what will eventually happen, which is that you will end up with good credit.
By using this card responsibly and paying your bill in full every month, thereby restoring your balance to $150, you are put on the radar screen of credit card companies. And you start to develop a credit score that starts out at around the lowest number, which is 300.
But be patient. It won't take long, less than 6 months, for your credit score to significantly improve.
About 9 months in, you'll start to get crappy credit card offers. They'll have low limits, around $300. But in less than a year, you'll get offers that are in the $500 to $1,000 range.
And there's a caveat I must mention: there's a cost to having credit cards, and it is this: for you to have about $2,500 worth of credit on cards, it's going to cost you about $500 a year in annual fees to keep those cards.
But things will improve as the years progress... Because as the annual fees remain the same, your credit limits will gradually go up.
The next thing I want to talk about is how to use your credit cards responsibly and increase your credit score even further...
You use them responsibly by paying them off every single month. Also, it reflects negatively on you with the trifecta of credit reporting agencies (Experian, Equifax, and TransUnion) when you exceed 80% of your card's limit. I know that to be a fact.
But use the hell out of your cards and pay them off every month and never exceed 79% of the card's limit, and you will soon enough achieve the coveted credit score of 850, which is as high as it goes.
Note: Capital One expressed to me that to achieve your highest possible credit score, you shouldn't exceed 30% of your card's limit. And that's very true as your card limits go up and into the thousands of dollars per each, at which time you will have arrived as an outstanding user of credit. But, initially, follow my previous instructions.
The arbitrary number system of 300 to 850 describes how credit worthy you are.
The most beautiful strategy is this...
To have $2,500 worth of credit cards, which is about five cards, and use them in place of your checking account / bank debit card to buy things and to pay your bills. And then before each card's payment due date, pay off each card using your checking account or your bank's debit card. Don't let it disturb you if you find your checking account running really close to zero some months. Take comfort in the fact that you can always use your credit cards to buy stuff and to keep your bills paid.
At the end of the day, it's all about achieving and maintaining that 850 credit score.
Why?
Because, someday, you may want a really big loan to help you start your own business! And one of the ways you'll achieve this credit worthiness with a bank is by having a really high credit score!
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