How to Start Building Your Credit

If you go to get a loan, whether it’s for a car, a house, or just for personal use, you need good credit. Credit is a quick indicator of your financial trustworthiness. Pretty much every aspect of your financial life gets easier when you’ve got good credit. But if you don’t have a credit history, it can be very difficult to assemble a decent credit score.

If you’re looking to get started building a good credit score, here are some tips to get you off the ground. Remember, financial responsibility is a lifelong blessing. It’ll keep paying off for the rest of your life!

Take it Slow

Remember: it’s best to start small and work your way up. There’s no reason to bite off more in credit card debt or loans than you can handle. The idea is just to build a credit score that reflects your responsible spending habits. Here are a few ways to do just that.

Get a Credit Card, Keep the Limit Low

If you have no credit history, you need one. Get a credit card with a low limit. Use it to pay for the basics. Things like gas, groceries, and the like, that you’ll consistently need, should go on this card. Then, when the bill comes due, just pay it off. Don’t let the balance float to the next month, so you don’t have to worry about paying interest.

This lets you start building up your credit score. Consistently using this credit card and paying off its low limit will show credit reporting agencies that you’re financially responsible. This is almost like a “cheat code” to building credit, as you’re not actually borrowing more than you have. You’re just using the credit card to “forward” money that you have in your bank account.

Help from a Relative

If a close relative, like a parent or aunt or uncle, has good credit, they might be willing to let you piggyback on it. They could authorize you as a user on a credit card they have, and you could then benefit from their good spending habits. If they consistently pay off their credit card bill every month and have good credit standing, this could seriously help you.

Keep in mind, your relative needs to trust you for this to work. They’ll be authorizing you to make purchases using that line of credit, so make sure not to abuse that trust. This often works for college students or young people looking to build a credit history without actually spending any of their own money.