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Last Updated: 6/22/2014 22:51 PST

12 Ways to Build Your Credit While You’re Young


1. Learn about what it takes to have a good credit score.

  • A credit score is not just about a credit card. It has to do with responsibility and reliability. There are many factors when determining your credit score.
  • Here’s how your credit score is broken down:
  • 35% Payment history: Paying your credit accounts on time is key. Late payments hurt your score.
  • 30% Amounts owed: The amount of debt you have compared to your limit is important. Low debt with a high limit is best.
  • 15% Length of credit history: A longer history will usually increase your score, although that is not always the case.
  • 10% New credit: Opening several credit accounts at once is risky.
  • 10% Types of credit used: This has to do with your retail accounts, loans, and credit cards. It is not smart to apply for these types of accounts too often.

2. Open a checking or savings account.

  • Opening both a checking and a savings account is wise. The money you want to save goes into the savings account, and the money that you plan to use to pay off debt goes into the checking account. It is almost impossible to maintain a good credit score without doing this.

3. Apply for a credit card and make sure it’s the right one for you.

  • Know what the risks are when applying for a credit card. You must have a steady source of income if you are applying without the help of your parents. If you do not have a steady source of income and choose to have your parents add you, they can do so. A credit card should only be used for affordable items. If it is not paid off each month, your credit score will decrease.
  • It is important to know about different types of credit cards in order to figure out which one is right for you. Every card has different benefits, and researching these benefits is helpful. Sometimes, the card that sounds cool might have some major disadvantages.

4. Know about your credit card limit, interest, and monthly payments.

  • Understanding everything that goes into having a credit card is very important. You must know your limit so that you do not spend too much money. One of the most important things to remember is that the limit is the very maximum. It should be looked at as something in place in case of an emergency, but it should not be seen as something that you wish to meet.
  • Remember that you need to pay your credit card bill each month. If you do not do this, it is negatively affecting your credit score.
  • You will be charged interest, so you should understand how interest works with your specific credit card.

5. Use your parents’ credit to increase your own.

  • If your parents have good credit, it is a good idea for you to build from that. To do that, you can have some of your parents’ bills transferred into your name. Your parents can still pay them by transferring money into your account, but it will seem as though you have done it. As long as they are still paid on time, this will increase your credit score.

6. Refrain from applying for multiple credit cards.

  • When people apply for a credit card, they often apply for more than one. However, this is not a good idea when you are first starting out. It is better to wait a year or two before applying for a second card so that you can establish your credit. Credit card companies do not like to see people who apply for several cards at once. Once you have established credit, feel free to apply for another card. This will actually help you because your limit will go up. When you have a high limit but you do not spend a lot, this looks good for you.

7. Pay all your bills on time.

  • Paying all bills on time, not just your credit card bill, is essential to developing good credit. In the past, this has not been an issue. Now, however, companies are trying to look at other bills to figure out whether or not you are someone who pays bills on time and in full.

8. Make use of retailer programs.

  • Retailer programs are promotional offers such as gas station cards and payment plans for furniture. These programs are helpful for you to use because they are often easier to qualify for. However, you should not use too many of these. If you do, you will once again only hurt your credit. You must remember that these are loans, and having too many loans at one time will hurt you when you are trying to get more loans.

9. Apply for a loan on a car.

  • Buying a car is important for your credit because, as long as you make your payments on time, your credit score will increase. However, this is not something that you should do just to boost your credit score. If you already want to purchase a car and need a loan to pay for it, this is a good option for you. Repaying the loan will make you look good, but in the long run, this will end up being a more expensive option because of interest. This option is not for everyone, so it is up to you to decide whether this is the right thing for you.

10. Check your credit score often.

  • You should always know your credit score, so you should try to check it at least once per year. There are some online sources that provide free credit scores, and this can help you to get a feel for where you are. Even if you think the score might be low, you should still check it.

11. Stay in one job for as long as possible.

  • Employment history is important when applying for a loan. It is useful for the person providing the loan because he or she can look for stability. If you are someone who moves from one job to another in a short period of time, the person is less likely to provide a loan for you because you seem less reliable.

12. Identify inaccurate charges.

  • There will be times when you will see that something on your credit card statement appears to be inaccurate. This would mean that you do not remember making that purchase. If you notice this, you should call the company and ask for proof. Do not assume that you are right. Instead, simply ask for proof and if they cannot provide it, they will most likely remove the charge.

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