Just Graduated College? 3 Ways to Build Credit

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Many college grads don’t have a credit history or score. Read on to see how you can establish one. 

If you’ve graduated from college, you may have a strong academic history to be proud of. But you may not have a borrowing history. And that could end up being problematic.

If you’ve never had bills in your name, it means the credit bureaus won’t have a way to assign you a credit score. And without a credit score, you might struggle to get approved for a credit card, to buy a car, or to rent a home.

Experian reports that an estimated 28 million Americans are credit invisible — meaning, they don’t have a credit history or score. So if you need to build some credit, here are some moves worth making.

1. Get a secured credit card

A secured credit card is different from a regular one in that the line of credit you’re eligible for is secured by a deposit you put down. Here’s how it might work. You might apply for a secured credit card and put down a $1,000 deposit. That deposit then serves as your spending limit.

That may seem unhelpful at first. But if you charge expenses on that secured card and pay your bills on time every month, that positive activity will go on your credit record. And eventually, it could lead to the credit bureaus being able to establish a credit score for you.

2. Get a credit-builder loan

Unlike personal loans, where you borrow a sum of money and actually get to use the proceeds, a credit-builder loan’s purpose is to simply help you build credit. What happens is that as you repay your loan, your payments are added to your credit history. If you’re timely, that’ll work in your favor.

Only to be clear, with a credit-builder loan, you’re not really borrowing money. You might get a $1,000 loan in name, but you won’t actually be given $1,000 to spend. Rather, you’ll pay down your balance in full and then get access to those funds.

3. Become an authorized user on a parent or relative’s credit card

You may not be able to qualify for a regular credit card of your own when you’re fresh out of college. But if you have a parent or relative who’s willing to add you as an authorized user to one of their accounts, it could help you build credit.

Once you’re on that account, activity associated with that account will become part of your credit history. So if your mom puts you on her credit card account and pays her bill in full and on time every month, you might eventually end up with a strong credit score as a result.

Of course, this tactic could also backfire on you, because in our example, if your mom were to fall behind on her payments or be consistently late, it could end up harming your credit history. But ideally, you’ll choose your account holder wisely to minimize that risk.

Building credit right out of college isn’t easy. But if you take these steps, you might manage to establish a solid enough credit history to get more borrowing options of your own.

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