4 Ways to Establish Good Credit at a Young Age By Meghan Belnap

161019_credit_card_computerWe live in an age of credit. From bank credit to credit cards to buying a car or house, everything requires credit–and a good credit score is extremely important. When you’re young, it can be difficult to establish that credit and prove to potential creditors that you are worth the risk and deserve that loan you’re asking for. Younger adults often ask, “How can I boost my credit score? I’m barely out of high school. How can I prove that I deserve this loan?” Here are four ways to establish good credit so you can purchase that house, car, or other item you have your eye on with a low interest rate.

Set Up a Checking and Savings Account
While it may not seem like much, having a checking and savings account that you regularly deposit money into can have a good impact on your credit score. Creditors look at debt-to-income rations to determine your eligibility, so having money put aside already boosts your appeal. The really nice thing about checking and savings accounts is they can be set up by minors early on, so you can begin building your credit before you’ve reached adulthood.

Get A Credit Card
By far the easiest way to build credit is to get a credit card. Pick one with good terms and no annual fee. Use it often, but make sure you pay it off regularly. The trick is to buy things with your credit card that you could easily pay for with cash. This allows you to build your credit and still pay your card off each month so you don’t incur dings to your credit score.

An extra bonus for using your credit card regularly is getting a card that offers points or perks for use. For example, if you have a card that offers points toward gift cards and such, using it for all your bills and purchases (and paying it off every month) will allow you to accumulate good credit AND lots of points, which can then be used for splurges or as gifts for friends and family. So you both build credit and save money. It’s a win-win situation.

Make Use of Tradelines
Tradelines are an industry secret that most people don’t even know exist. It is a way to add a large credit limit with perfect payoff history to your credit list and it will boost your credit score practically overnight. Tradelines offer an easy, cost effective way to increase your credit score without the worry of overspending.

Become an Authorized User
If you’re too young to have your own credit card or aren’t ready for one yet, you can become an authorized user on your parents’ card. Having your name on their card gives you credit and allows you to build credit while also having a bit of a safety net. If you’re slightly older, you can add someone to your own card, making them an authorized user. They can then use your card as well and help you build your credit score. With this second option, make sure you only add someone you can really trust and rely on to pay their portion of the bill. While they can help you increase your credit score, a deadbeat friend or family member can hurt your score as well.

Being young doesn’t have to be detrimental when it comes to credit scores. There are numerous ways to start building your score and keep it high. Don’t let your lack of credit stop you from taking that trip, buying that house, or getting that new car! The world is waiting for you.