Young adults starting out on their own often bump into a cold fact of financial life: Having no credit history can limit your options just as much as having bad credit does. Lenders, rental offices and insurance companies use your financial track record to judge how likely you are to pay debts and bills — and if you're a blank slate, you're generally considered a risk.
Fortunately, there are some simple steps you can take to quickly establish your credit record.
Start with a credit card
One of the quickest ways to develop a positive credit history is with a credit card, which lets you show that you handle small amounts of debt responsibly month after month. Even if you can't qualify for a card on your own, there are ways to take advantage of this credit-building tool:
- Recruit a co-signer. You might be able to get a card if someone with good credit — such as a parent — is willing to co-sign the application with you. You and your co-signer will be equally responsible for the charges you make, along with any late-payment fees or other penalties if you don't make payments on time. Also, late or missed payments can damage your credit score and your co-signer's, too. But every time you make a payment on time, it will shore up your credit history.
- Become an authorized user. Another option is to ask a family member or significant other to add you to their credit account. First, though, make sure their bank reports activity by authorized users to the major credit bureaus — otherwise, this won't help your credit score. And remember that here, too, your activity with the card can affect someone other than yourself.
Once you have a card, your behavior with it will determine how high, and quickly, your credit score rises. To keep moving in the right direction:
- Make on-time payments. The most common credit-scoring model is the FICO score, and it is based on a combination of factors. The biggest, making up 35% of your score, is your payment history. Pay all of your bills (not just your credit card) on time to keep your score rising.
- Keep balances low. Try not to use your card up to or near your credit limit; it looks bad to creditors if your cards are maxed out. A good rule of thumb is to keep your balances at or below 30% of your total credit limit.
- Don't over-apply for cards. According to a NerdWallet study that included an analysis of millennials' credit scores, many young adults are applying for the wrong credit cards and getting rejected — and that's hurting their credit, since excessive inquiries can make someone look like a bad credit risk. Apply only for cards you really want, and space out those applications.
- Check your credit reports. You have the right to get a copy of your credit report from each of the three major reporting agencies — Experian, Equifax and TransUnion — once a year for free. Review yours and report any errors that might hurt your score.
It can be easier to build up good credit if you have a professional helping you. Consider consulting with a financial institution to help figure out the best way to establish credit and make other important financial decisions.
© Copyright 2016 NerdWallet, Inc. All Rights Reserved
It’s easy to blow your travel budget on full-price lodging. But these tips can help you save money on your hotel room so you can spend your hard-earned cash on something more memorable.
1. Focus your research
Start with sites like Kayak, Expedia or Priceline.com to get an overview of hotels in your desired area, but don’t rely on them to give you the full picture. Go on to research those hotels on your own. Search for promotion codes and perks such as free parking, breakfast or WiFi. And don’t neglect a hotel’s own website. Some chains promise the best rate when you book via their site.
2. Negotiate your rate
Once you know the lay of the land, select a few favorites and pick up the phone. Tell the hotel the price you found via other sites and see if they can beat it. Bargaining directly with the hotel yielded a better room or rate nearly 80% of the time, according to a survey by Consumer Reports.
3. Look for last-minute deals
Apps like HotelTonight can help last-minute travelers score low rates on quality hotel rooms. A recent search on the app turned up The Swissotel Chicago for $314 for two nights, with taxes and fees. That was more than $100 cheaper than the prices listed on other popular sites for booking hotels.
You can book up to a week in advance with HotelTonight. Other apps for last-minute deals include One:Night, which is currently available in six cities, and Priceline.com, which offers “tonight only” deals at 11 a.m. each day.
Last-minute bookings don’t work in every circumstance, though.
“If you’re traveling to a city for a conference with thousands of other people or to an area with limited hotel options, you’ll want to lock in a room well in advance,” says Flavie Lemarchand-Wood, a spokesperson for Priceline.com.
» MORE: The cheapest way to rent a car
4. Bid on a room
Bidding on a room can yield solid savings, but you need to be OK with leaving things a little to chance. Priceline.com’s “name your own price” feature lets you select neighborhoods and star levels when you bid, but doesn’t reveal the name of the hotel until your bid is accepted.
Priceline.com’s Lemarchand-Wood suggests using the site’s regular listings to get a sense of hotels available in your desired area and star level. Then, she says, be flexible.
“When you’re ready to make a bid, start where you are comfortable and try again” if your bid is rejected, Lemarchand-Wood says. “Don’t get discouraged.”
The downside of bidding: Your credit card is charged as soon as your bid is accepted and you cannot change or cancel your reservation.
5. Think outside the box
Hotels aren’t your only lodging option. You can rent a room, apartment or entire house via sites like Airbnb and HomeAway. And hostels are a great option for budget travelers, especially those venturing outside of the U.S. Don’t worry — you don’t need to share a dorm-style room with a mass of 19-year-olds (unless you want to). Most hostels offer a handful of private rooms with ensuite bathrooms.
6. Pick a different neighborhood
Staying in the heart of the city typically costs more. Save a few bucks by staying away from the city center, but near public transportation for easy downtown access. In Chicago, for example, you can book the Hyatt Regency O’Hare for $79 per night, according to a recent search on Kayak. The hotel is just a few minutes’ walk from the Chicago Transit Authority’s Blue Line, giving you easy access to the airport and downtown Chicago. By comparison, staying at the Hyatt Regency downtown will run you $125 per night.
7. Use your affiliations
Seniors, government employees, students, members of the military and AAA members may qualify for discounted hotel rates when traveling. Ask the hotel before booking or look for deals via websites such as AARP, Military.com and AAA.com.
Updated May 10, 2017.
One of the best things about choosing to use a rewards credit card for your day-to-day spending is the points, miles or cash back you can earn every time you swipe. But it can be tricky. To make sure you're getting the most out of your card, take a look at the tips below.
1. Pick a card that offers rewards you'll actually use
It's easy to get caught up in the excitement around a new card that's just hit the market. But before you apply, consider whether the card comes with a rewards program that actually fits your lifestyle. Otherwise, you might get stuck with a bunch of points or miles that you'll never redeem — something that happens to 1 in 5 consumers, according to NerdWallet's research on reward cards.
Doing some digging upfront to find a card that will be valuable to you is the key to ensuring you'll get the most out of your plastic.
2. Know your card's rewards earning structure
By investing a little time in reading your card's terms and conditions, you might find there are ways to score extra points on certain kinds of spending.
For example, it's common for travel credit cards to award extra points or miles for every dollar spent on dining out. Consequently, using your travel card when you take your family out to dinner or pick up your morning coffee is a smart idea, because it will help you get to your next vacation faster. Knowledge is power, so get familiar with the ins and outs of how to maximize earning your rewards.
3. Budget carefully every month
If you're carrying a balance on your card and justifying it with all the rewards you're earning, here's a wake-up call: You're paying out much more than you're bringing in. Most credit cards return only about 1% of your spending in rewards, and charge double-digit interest rates on unpaid balances.
To make the math work in your favor, stick to a budget so you don't put more on your card than you can pay off each month.
4. Keep your account in good standing
One of the biggest mistakes you can make with a credit card is to fall behind on payments. Miss one and your account will no longer be in good standing and your ability to earn rewards could be jeopardized. Also, your credit score will suffer.
The solution? Pay your credit card bill on time each month, preferably in full but at least the minimum due. Online bill pay can make that process fast and easy.
5. Be smart about redeeming your rewards
Many rewards cards have multiple options when it comes time to redeem points or miles. For example, in some cases you'll be able to choose between travel credits or merchandise.
However, it's common for points or miles to vary substantially in value depending on how you cash them in. Before you go through with a rewards redemption, do the math to figure out which choice will give you the most bang per point. After all, there's no sense in using your rewards on a vacuum when they would go further if redeemed for airfare.
Following these tips can help sweeten the treats a rewards card can provide while you navigate the tricky ins and outs of how it all works.
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