Fresh Off the Graduation Stage? Here Are 5 Ways to Start Building Credit

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 buying your first car, but how do you get approved for these bigger ticket items if your financial health is starting at ground zero? Consider ways to start building 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.

Pay Your Student Loans on Time

As a new graduate it will be time to start paying back student loans. Payment history has the largest impact on your credit score. This includes student loan, credit card, car loans and home loan payments. Making payments on time and in full are critical to building and maintaining a good credit score.

Putting aside part of every paycheck and setting reminders will also help you build positive financial habits and ensure your bills are paid.

Become an Authorized User

Another great way to build credit is to become an authorized user. An authorized user is when a primary credit card holder, usually a parent or trusted family member or friend adds you to their account. As an authorized user you benefit from the primary holder’s payment history as it will appear on your credit record even if you don’t have physical access to the credit card. If the account has been open for several years, is paid on time, and has a low balance relative to its limit, it could help your credit score. 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.

Get a Secured Credit Card

If you’re starting out with zero credit, you may also want to consider start building credit with a secured credit card. A secured credit card requires a deposit which becomes the credit line for the account. So if your deposit is $500, the credit limit of the card will be $500. If this is your first credit card, a smart trick is to only use it for gas or groceries. You’ll want to keep the credit utilization low, best practice is under 30%. In this example, if your limit is $500 only put $150 or less on your card every month and pay the balance off on time and in full.

After 6-12 months of using and paying off your credit card on time, not only will your credit score improve but you will most likely receive your deposit back for the card and be graduated to a card with more benefits.

Keep Calm and Start Small

If you just opened your first credit card, resist the temptation to splurge and charge everything under the sun. Remember credit cards are not free money, with high interest rates that $600 spent on new apartment furniture can easily turn into thousands of dollars and negatively impact your credit score if you can’t afford to pay it back on time.

Start by using your new plastic to buy something small, like groceries, gas or coffee and pay off the balance right away. It will take a while to build a good credit score, but to ensure you don’t get in over your head, only charge items that you can afford to pay off by the due date.

Check Your Credit Score

Once you start giving your credit score some more love, be sure to keep an eye on its progress. The Mint app provides you with your credit score for free so you can see where you truly stand financially.

Mint 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.