How to Build Your Credit When You’re Just Starting Out

Once you turn that magic number of 18, you’re ready to face the world as an adult. Most people this age aren’t quite living on their own yet, but they can start making decisions about how their life will turn out. One important part of being an adult is your financial health, and your credit is a huge part of your ability to purchase what you want at a good price. For those who are just starting out, here are tips to help you build essential credit.

Search for Secured Credit Cards

You should start your credit-building process by opening a new credit card account. If you have no credit history, this will be tough since banks are unlikely to lend you a line of credit in this situation. One place you may find help from is through a secured credit card. With a secured credit card, you can give the bank a deposit that covers your credit limit. As you make purchases and pay them off, your collateral deposit becomes less important because you pose a smaller risk to the bank.

Ask to Be an Authorized User

Some teenagers are also able to build their credit history by being an authorized user on a parent’s credit card. The great thing about having your name added as an authorized user is it poses no risk to your own credit history. If financial disaster happens, and your parent is unable to pay the card’s balance, you are not liable. As the main cardholder responsibly uses the card, your credit history can also benefit.

Pay Your Bills On Time

A big part of your credit score is your history of paying bills on time. When you’re just starting out, one late payment can have a disastrous impact on your meager history. Whether you have credit card bills, a car payment, or a monthly phone bill, you need to make sure each payment is made on or before the due date. Many businesses now report to the credit agencies when payments are missed, so you should do whatever you can to avoid being late.

Check Out Your Credit Report

To check if you have any dings on your credit report file, you should take the time to request your free copy from the three major credit agencies and look them over. By law, you’re allowed to request one free copy per year from all of the major agencies. Once you get your report, make sure you review the history and account information to check their accuracy. Contact the credit reporting agency if there is a mistake on your report.

Borrow With a Cosigner

In some situations, such as buying a new car or borrowing money for college, your small amount of credit history isn’t enough to secure a loan. Some financial gurus recommend you partner up with a cosigner for these scenarios to extend your purchasing power. Ask someone you trust, such as a parent or other relative, and make sure you meet your financial responsibility when it’s time to pay your loan back.

Find Out About No Credit Loans

Getting a car with no credit is possible even without a cosigner or hefty down payment. There are plenty of lenders around who are willing to take a chance on someone just starting out. You may need to meet more requirements and demonstrate financial stability by submitting copies of your pay stubs from work to qualify for these loans.

Use Credit Wisely

When you finally get approved for a loan or credit card for the first time, be sure to use your credit wisely. Don’t overextend yourself by going on a shopping spree and charging up your credit cards to the max. It’s important to be responsible to develop positive credit history over time.

Pace Yourself

The last tip is to pace yourself with building credit. This process will take years to truly master, but the end result will be a solid credit history and a great credit score. With time, you’ll have a positive history that will enable you to buy whatever you want in the future.

Your creditworthiness is an essential piece of being a responsible adult. Start off on the right foot with credit by paying careful attention to these tips so you can empower yourself to save money on interest charges and large purchases over time.