How to Build Credit:
Tips for College Grads and Everyone Else
Everyone has to begin building credit at some point,
although it can be a tricky situation. Without a credit card, it’s hard to
build credit history. Without credit history, it’s hard to qualify for a credit
card. Following college graduation is often when individuals apply for their
first credit card but there are many others who don’t start building credit
until years after they’re eligible. If you’re under 21 years old, you’ll need
either a card co-signer or a verifiable income to prove you can repay your
are simple and effective tips to build credit either for those with no credit
history or those looking to repair bad credit history.
Get a Credit
your first credit card, or if you’ve been denied credit in the past, look for
options available to those with little or no credit.
credit cards – Almost any applicant will quality for this type of card as
it’s backed by a mandatory cash collateral deposit (a deposit equal to the
credit limit), which helps remove the risk of default.
credit cards – This type of card offers a higher acceptance rate but comes with
a lower credit limit and higher interest rates.
credit cards – This type of card is commonly used to build credit—think of
a card for a department store or gas station. However, these generally
have lower credit limits and much higher interest rates so you want to be
sure to pay in full each month.
- Become an
authorized user – Ask a family member to be authorized on his/her card,
and this can be good for both of your credit histories if handled
responsibly. However, if the person whose card you’re authorized on
defaults, it’s bad for both of your credit histories. Do this only with
someone you trust.
that every major decision, especially financial ones, should be done with care
and consideration. Before you open any type of credit card, read the fine print
to understand the fees, interest payments, reward program details and other
you receive your first credit card, no matter what type of card it is, it’s
extremely important to start building good credit. Once you have a solid credit
history, you’ll be offered the best cards, rates and loans. Below are tips for
how to handle credit responsibly.
- Pay your card in
full each month – As much as possible, pay your entire balance to avoid
wasting money on interest. This will help your credit history as well.
- Pay your bill on
time – Creditors care about your on-time payment history. Even if you’re
paying the minimum monthly balance, pay on time every month.
- Don’t carry a
large balance – Experts advise to use no more than 30 percent of your
credit limit at any time. Otherwise, it looks like you’re dependent on
credit and a possible risk.
- Use your card
regularly – Unused credit accounts may be closed by issuers after a
certain period of time. This will cause your credit utilization to go up
and your length of payment history to go down, neither of which are good
for your credit report.
- Keep accounts
open for as long as possible – Unless an unused card has an annual fee,
keep it open and active to boost credit utilization and length of payment
history on your credit report.
Check each of your credit reports annually – You
are entitled to a free credit report annually from the three major credit
reporting agencies—Experian, Equifax and TransUnion. Use AnnualCreditReport.com
to access these reports each year to ensure there are no errors or
you’re responsible and follow good credit guidelines, you’ll find that you are
rewarded with a good credit score—which is based on your credit history—and the
many perks that come with it. It’s never too late to begin building credit or
repairing bad credit, and your local community banker will be happy to work
This information is provided
with the understanding that the association is not engaged in rendering
specific legal, accounting or other professional services. If specific expert
assistance is required, the services of a competent, professional person should