If you’re a new graduate, congratulations and welcome to the world of #adulting! It may seem scary and the future may be unknown but focusing on what is in your control is a good start toward building yourself up for success. For example, you may already be planning for your first “adulting” moments like applying for a new apartment or leasing your first car, but how do you pay for these bigger ticket items if your financial health is starting at ground zero?? Consider ways to build your credit!
Building credit is actually pretty straightforward. Here are 5 ways new grads can start building credit, so you can go out there and tackle the world, and your credit score.
Get a Secured Credit Card
If you’re starting out with zero credit, you may want to consider building it with a secured credit card. A secured credit card requires a cash collateral deposit that becomes the credit line for that account. This deposit is kept in a savings account and if you default on a payment, the money in the savings account can be used to cover the balance.
Building credit with a secured credit card can be simple. All you need to do is make one or two transactions on it every month, and pay off the balance on time (or early!).
You can use this for a few, set items each month that you already budget for and can afford, such as regular grocery trips.
Become an Authorized User
Being an authorized user on someone else’s credit card means that the cardholder’s payment history appears on your credit record. And, if the account is old, paid on time, and has a low balance relative to its limit, it might help your score in addition to the primary owner’s. Just be sure this cardholder is financially responsible and trustworthy!
If this feels like the right approach for you, see if you can be added to a parent or family member’s account.
Keep Calm and Start Small
If you just opened your first credit card, PLEASE don’t use it to buy a trip to Barcelona! Resist the temptation to splurge and buy all new apartment furniture. Start by using your new plastic to buy something small, like groceries and coffee, and pay off the balance right away.
It takes a while to build a credit score, but to ensure you don’t get in over your head, only charge items that you can afford to pay off immediately. The good news is: you don’t even have to wait for a bill to come to make a payment! By jumping in and making regular payments, you’ll set yourself up with good habits and ensure you don’t carry a balance past a due date.
Pay Your Student Loans on Time
While a large part of your credit score relies on how well you manage revolving debt, like a credit card, student loans also play an influential role.
Student loans and car payments, which you pay back in equal installments every month, are what are known as installment loans. Be sure to be current and on time with your student loans. While they’re often hailed as “good debt,” a missed payment or delinquency can make life miserable.
Check Your Credit Score
Once you start giving your credit score some more love, be sure to keep a close eye on its progress. Turbo provides you with your credit score for free so you can see where you truly stand financially.
Turbo also gives you customized tips and personalized insights on ways to improve your financial health so you can move confidently forward in your new adult life. First stop: credit score. Next stop: the world.