It’s time to establish your credit [Personal Finance]

Sooner than you think, your credit score will start counting.

A solid credit score can mean the difference between qualifying for a low-interest apartment or car loan or missing out. So, to have ready credit when you need it, now is the time to start building a good and long credit history.

There are several ways to build credit, and it could be as simple as reporting your current bill payments to major credit bureaus. But keep in mind: Building credit takes diligence, especially since missing payments can hurt your score for years to come.


Your credit score is a number that usually ranges between 300 and 850 and is calculated based on how reliably you have paid past debts, such as credit card bills. Lenders use your credit score to predict the likelihood of you paying off your debt.

Your credit score helps determine the loans you can receive, the interest you’ll be charged, the credit cards you can qualify for, and the properties you can rent. An employer may even check your credit history. Having a good credit score can save you money later, mainly through lower interest rates when you get a loan.

If you’re starting out with no credit history, you’re not alone. In the United States, nearly 40% of people between the ages of 20 and 24 have little or no credit history to generate a score, according to the Consumer Finance and Protection Bureau. Unfortunately, the same is true for about 20% of the population.

Building your credit can seem overwhelming if you haven’t thought about it before, but there are plenty of strategies to employ, even if you’re just getting started. Start by establishing good debt management habits, such as not taking on more debt than you can afford, says Brittany Mollica, a certified financial planner based in Chapel Hill, North Carolina. Missing payments will hurt your score and can become a burden when you need to borrow money in the future.

“Building good habits to always pay your bills is really important,” says Mollica. “You don’t want to have to climb out of a hole of all kinds of credit card debt that you’ve accumulated, especially in the beginning.”


Credit cards can be a great tool for building credit, but they can also hurt your score if you take on more debt than you can handle.

If a relative or other trusted person in your life has a high credit limit and a long history of timely payments, you could become an authorized user on their account and benefit from their good credit. It’s one of the easiest ways to lengthen your credit history, says Blaine Thiederman, certified financial planner in Arvada, Colorado.

Becoming an authorized user will also impact your credit utilization rate, or the amount of money you owe lenders divided by the total credit you have, which can improve your credit score.

If you have your own income, you can apply for a credit card at 18; otherwise, you must wait until you are 21. A secured credit card is usually the best credit card to start with. A cash deposit protects these cards, and since the credit card company can take that deposit if you miss payments, people with short or poor credit histories may qualify.

The deposit you need to make for a secured credit card could be a burden, and if so, another card might be better for you. These cards use income and bank account information to determine your creditworthiness rather than your credit score.


If you live independently, rent, utility and phone bill payments can all be reported to the credit bureaus. So paying these bills can boost your credit if they are on time and you have reported them.

Unlike credit card payments, these payments are not reported automatically and may require a third-party service, such as Experian Boost or UltraFICO, to notify the credit bureaus of your payments.

Keep in mind that these services sometimes require a fee, and reporting your bill payments doesn’t always affect your credit score. instead, they may just show up on your credit report.


Making regular loan payments can also help you build your credit. And even if you have no credit history, some loans are available.

Credit-generating loans rely on income rather than credit for approval. If you are approved, the loan is deposited into a bank account and becomes available once you pay it back. Your monthly payments are reported to major credit bureaus.

Student loans are another loan you can use to boost your credit when you’re just starting out. Federal student loans do not require credit to qualify, unlike most private student loans. Paying off your loans will help you build your credit history, and you can start while you’re still in school by paying interest only.

This column was provided to The Associated Press by personal finance website NerdWallet. Colin Beresford is a writer at NerdWallet. Email: [email protected] Twitter: @Colin_beresford.


Data Point: Invisible Credits

NerdWallet: Does Paying Bills Increase Your Credit?

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