Building Your Credit 101: Tips for Recent College Graduates

Building your credit is one of the most important things you can work on straight out of college. In fact, you may already have started while you were in college. Nevertheless, once you get your first real job, it’s up to you to keep your credit in good standing if you want to buy a new car or house in the near future. Here are a few things you can do to get started:

Read About Credit Scores

Before you go open up a credit card or do anything crazy, take some time to read about credit scores, how they are calculated, how they will impact your future and more. You can’t build a great credit score until you understand all the different types of scores and what your ultimate goal is.

Pay Those Student Loans

The most readily available form of credit for college students is usually student loans. Your student loan servicer reports to the credit bureaus every single month that you make an on-time payment. If you skip a payment, that will show up on your credit report too. Make sure that you stay on top of your student loans because there are some interest savings and forgiveness programs that are only available if you have made all of your payments on time.

Use a Low Limit Credit Card

If you’ve never had access to a credit card before, it is best to limit yourself at first until you get the hang of things. If your parents are willing to add you as an authorized user on their account you can start boosting your credit score while taking advantage of their good credit to get a lower interest rate. Alternatively, opening a store card with a low limit can give you the ability to make small cyclical payments that will help your credit grow. Try to get a card at a store where you can shop for groceries and other necessities, not just clothing because if you find yourself in a pinch a general purpose card will be much more useful. The longer you make on-time payments, the higher your score will go. Keeping your balance under 30% of the limit will also earn you some bonus points.

Buy a Car

If you’ve landed a job and you’re financially stable enough to buy a car, this can be a great way to build credit. Having different types of loans on your credit report helps boost your score. Most banks view car loans as credit-building loans and have options available even for those who have no credit history.

The most important thing to remember is that on-time payments are the single most important part of raising your credit score. Keeping your balances in check is also important. Fortunately, there are several ways to boost your credit right out of college without putting yourself in too much debt.

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