For Young Adults, Credit Building Begins Now


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Sooner than you think, your credit score will start to count.

A good credit score can be the difference between qualifying for or missing out on a low-interest apartment or car loan. So, to get credit ready when you need it, now is the time to start building a good, long credit history.

There is more than one way to get credit, and it can be as simple as reporting your current bill payments to the major credit bureaus. But keep in mind: building credit takes diligence, especially since missing payments can hurt your score for years to come.

Your credit score is a number that typically ranges from 300 to 850 and is calculated based on how reliably you have paid off past debts, such as credit card bills. Lenders use your credit score to predict the likelihood of you paying off your debt and to decide how much interest to charge you.

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

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

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.

A secured credit card is usually the best credit card to start with. A cash deposit secures these cards, and because the credit card company may accept this deposit if you miss payments, people with short or poor credit histories may be eligible.

Making regular loan payments can also help build your credit. And even if you don’t have a credit history, some loans are available.

Loans to credit builders rely on income rather than credit for approval. If you are approved, the loan is in a bank account and becomes available after you have paid it off. Your monthly payments are reported to the major credit bureaus.

Student loans are another loan that you can use to build your credit when you are starting out. Federal student loans do not require credit to qualify, unlike most private student loans. Paying off your loans will help broaden your credit history, and you can get started while you’re still in school by making interest-only payments.

Beresford writes for NerdWallet.

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