Establishing a strong credit history is an essential step toward financial independence. It can pave the way for significant milestones, such as buying a home or starting a business. However, navigating the world of credit scores and reports can seem daunting for many people, especially those just beginning their journeys. Below, we’ll explain how to establish and maintain a great credit score.

Apply for a Credit Card

Applying for a credit card through a bank or credit union is one of the most effective ways to start building your credit history. If this is your first credit card, consider opening it at a credit union, as these financial institutions often have lower interest rates for members. Another reason to apply for a credit union credit card is that you gain access to resources that can enhance your financial knowledge.

You could also cosign for a credit card, which is especially helpful if you don’t meet all the qualifications to open an account on your own. Getting a credit card is easier when you have a cosigner with a great established credit score.

Take Out a Small Loan

Next in our guide to establishing and maintaining an excellent credit score is taking out a small loan you can confidently repay. These loans, also known as credit-builder loans, are designed to help people establish or improve their credit scores. You’ll begin building your credit score by making every payment for the loan on time.

If you have no credit, it may be harder to take out a loan. However, as with credit cards, you can have someone cosign the loan to increase your chances of getting the money and a better interest rate.

Always Make Payments on Time

Once you establish your credit, you’ll want to continue building it to obtain a higher score. Opening multiple credit cards or taking out various loans all at once won’t necessarily improve your credit. Instead, you should make all your credit and loan payments on time and strive to pay at least the minimum payment until the balance is zero.

Building your credit takes time, but you’re off to a great start by prioritizing payments and borrowing only money you can repay. Work toward achieving a high credit score now so that you can easily take out loans for big-ticket purchases such as a vehicle or home later.

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