Now it’s time to build your credit

Sooner than you might think, your credit score will matter.

A solid credit score can make the difference between qualifying for a home or low-interest car loan or missing out. So, in order to have credit ready when you need it, now is the time to start building a good and long credit history.

There’s more than one way to build credit, and it could be as simple as reporting your ongoing bill payments to the major credit bureaus. But remember: building credit requires care, especially since missing payments can hurt your score for years to come.


Your credit score is a number, usually between 300 and 850, calculated based on how well you have been able to pay off previous debts, such as credit card bills. Lenders use your credit score to predict how likely you are to repay debt.

Your credit history helps determine the loans you can obtain, the interest you will be charged, the credit cards you may qualify for, and the properties you may rent. An employer can even check your credit history. Good credit can save you money later, primarily through lower interest rates when you take out a loan.

If you’re starting out with no credit history, you’re not alone. In the US, according to the Consumer Financial Protection Bureau, nearly 40% of people between the ages of 20 and 24 have little to no credit history to make a rating. Unfortunately, this also applies to about 20% of the population.

Building your credit may seem overwhelming if you’ve never thought about it, but there are many strategies you can employ even if you’re just starting out. Start by establishing good habits when dealing with debt, e.g. For example, don’t take on more debt than you can afford, says Brittany Mollica, a board-certified financial planner based in Chapel Hill, North Carolina. Missing payments hurts your score and can become a liability if you need to borrow money in the future.

“It’s really important to get into good habits of always paying your bills,” says Mollica. “You don’t want to have to climb out of a hole full of credit card debt that you’ve accumulated, especially if you start early.”


Credit cards can be a great tool for building credit, but they can also hurt your score if you end up in more debt than you can handle.

If a parent or other trusted person in your life has a high credit limit and has a history of making payments on time, you could become an authorized user of their account and benefit from their good credit history. It’s one of the easiest ways to extend your credit history, says Blaine Thiederman, a certified financial planner in Arvada, Colorado.

Becoming an authorized user also affects your credit utilization rate, or the amount of money you owe lenders divided by the total credit available to you, which can benefit your credit score.

If you have your own income, you can apply for a credit card at the age of 18; Otherwise you have to wait until you are 21 years old. A secured credit card is usually the best credit card to start with. A cash deposit supports these cards, and since the credit card company can collect this deposit if you miss payments, those with short or bad credit histories can qualify.

The deposit you have to pay for a secured credit card could be a liability, and if that’s the case, an alternative card might be better for you. These cards use income and bank account information to determine your credit score, not your credit score.


If you live independently, payments for rent, utilities, and phone bills can be reported to credit bureaus. So paying those bills can build your credit if they’re on time and you’ve reported them.

Unlike credit card payments, these payments aren’t automatically reported and may require a third-party service like Experian Boost or UltraFICO to alert the credit bureaus to your payments.

Keep in mind that these services sometimes require a fee, and reporting your bill payments doesn’t always affect your credit score. Instead, they may only appear on your credit report.


Regular payments on loans can also help you build your credit. And even if you don’t have a credit history, some credit is available.

Credit builder loans rely on income rather than credit for approval. If you’re approved, the loan sits in a bank account and becomes available once you’ve repaid it. Your monthly payments are reported to the major credit bureaus.

Student loans are another loan you can use to build your credit if you are just starting out. Government student loans do not require credit to qualify, while most private student loans do. Paying off your loans will help you grow your credit history, and you can start doing it while you’re still in school by making only interest payments.


This column was provided to The Associated Press by personal finance website NerdWallet. Colin Beresford is a writer at NerdWallet. Email: [email protected] Twitter: @Colin_beresford.

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