How to Build Credit for the First Time

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Building a credit for the first time may seem daunting and intimidating, but it doesn’t have to be. Perhaps you’re young and just started thinking about credit, or maybe you moved to the U.S. from a cash-based society and don’t know, or understand, how to build credit. With these tips, you can get started building your credit with confidence.

Why Do you Need to Build Your Credit?

Good credit is crucial for financial success. It opens up numerous opportunities and provides options that would not be available otherwise. A good credit places you in a position of power. In addition, good credit can affect things like your ability to rent (or buy) a home, the kind of car you can lease, getting better interest rates, and even having access to utilities!

In a nutshell, maintaining good credit is an investment in oneself, and it is worth the time and effort that is required to learn how to build credit.

The good news is that building good credit is possible, and can lead to greater financial opportunities down the road. So, let’s take a look at how you can build your credit!

Steps to Building Your Credit

1. Learn About the Topic.

Before you dive headfirst into something, it’s always a good idea to do a little bit of homework first, just like you’re doing right now. So, good job! Having some background knowledge will always go a long way in making your journey smoother, so take the time to educate yourself on this topic.

Research and understand the basics about credit scores, how they are calculated, and what impacts your credit etc.

2. Get a Secured Credit Card

A secured credit card is a great way to start building your credit score! You simply put down a deposit, which serves as collateral for your credit card. You’ll be granted credit only up to the amount of your deposit.

It is advisable to compare different secured credit card options. Look for cards with reasonable fees and interest rates. Some secured cards also offer rewards programs.
Another great thing about secured credit cards is that they’re typically inexpensive and many banks allow you to start with as little as $200! My husband and I started building our credit scores individually through secured credit cards and it significantly helped.

3. Be An Authorized User

This option is particularly great for teens, college students and young adults that have no regular income.

All you need is someone with good credit who is willing to add you to their credit card as an “Authorized User”.

Another nice thing about this is the fact that many banks makes this process very easy. They often don’t need your social security number. In my experience, all they requested was the name, date of birth and address. The card owner simply call the bank and add you to their account; or add you themselves online.

This is a great way parents can help their teens or young adult kids build a good credit.

4. Use Your Monthly Rent and Utility Payments

There are various service providers that can help report your monthly payments to credit bureaus.

Experian Boost is one of such services. It simply scans your bank account for utilities, rent and video streaming payments, and reports these on your credit report.

Other similar services are ExtraCredit, SimpleBills, Rental Kharma, Credit Rent Boost, and RentReporters. Some of these charge a fee for their service.

5. Take Advantage Retail Interest-Free Offers

Some retailers offer interest-free credits/loans on purchases you make from them. These are interest-free usually for a short period, so bear that in mind, and try paying before the offer period ends. That way, you avoid paying interests. Your payments on these accounts are reported to the credit bureaus, which helps build your credit.

Whatever option you eventually choose, be careful to make sure you use your credit wisely. Mismanaging your credit can have adverse effects, so continue to educate yourself on how best to not just build, but also improve your credit.

All the best!

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