How High School & College Students Can Build Credit
As young adults navigate the world of finances, one crucial aspect that often gets overlooked is building credit. Establishing credit is essential in securing loans, renting apartments, or even getting a job. However, building credit can appear daunting and often requires time and patience. In this article, we will outline some ways for young adults to build credit and pave the way for a secure financial future.
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1. Apply for a Credit Card
Obtaining a credit card is one of the most common ways to build credit. As a young adult, you may consider applying for a secured credit card. A secured credit card typically requires a cash deposit that serves as collateral to secure the credit limit. They are often easier to qualify for and can help establish credit. Once approved, make sure to use the card responsibly by charging small amounts and paying the balance in full and on time every month.
2. Become an Authorized User
If a parent or guardian has an established credit card, they can add you as an authorized user. When done correctly, this can help build your credit history. However, make sure to communicate your spending limits with the primary cardholder, and also ensure that they are responsible borrowers who make regular payments.
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3. Pay Bills On Time
Consistently paying bills on time is crucial in building credit. Late payments can hurt your credit score and negatively impact your credit history. Set auto-payments or reminders to ensure that you pay all bills on time. Paying student loans, rent, utilities, and any other bills on time shows lenders and creditors that you are responsible and can manage your finances.
4. Monitor Your Credit Report
Monitoring your credit report helps you stay up-to-date on your credit status and ensure that there are no errors or fraudulent activities on your account. Monitoring can be done through free services like Credit Karma, which provides weekly updates on credit scores and reports. By reviewing your credit report regularly, you can also look for any areas needing improvement.
5. Find a Co-Signer
If you can't qualify for a credit card or loan, finding a co-signer with good credit can help. Co-signers are typically family members or close friends who sign on the loan or credit card application to guarantee payments. Having a co-signer can make it easier to get approved for loans or credit cards while also helping you build credit.
Building credit is an essential aspect of personal finance. It takes time, patience, and responsible management of loans, credit cards, and bills. As a young adult, establishing good credit sets the foundation for a secure financial future. By following these tips, you can begin to build your credit score and establish credit for future investments, such as a car, a home or even starting a business.
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There is a lot to be gained from our free general financial aid advice, but it’s also a very individual process. If you have remaining financial aid questions, email us to discuss more or book an individual session.