There are many ways to build credit, and they all involve creditors reporting your bill payment information to the major credit bureaus: Experian, Equifax and TransUnion.
To begin establishing credit if you have none, try one or more of these options:
Become an authorized user on a parent's credit card.
If one or both of your parents have a good credit history and keep their credit card balance low, you could ask them to add you to the account as an authorized user. As an authorized user, you may or may not have your own credit card for purchases, depending on your agreement with the primary cardholder, but assuming they continue to pay the bill on time and keep their balance low, your credit could benefit. Make sure the card issuer reports authorized-user activity to the credit bureaus, because not all do.
Open a student or secured credit card.
College students can apply for a student credit card, which is often easier to get approved for than a non-student card. Whether or not you're in school, you could also consider getting a secured credit card. Secured cards require a security deposit, which typically becomes your credit limit. This makes secured credit cards easier to obtain than regular unsecured cards because the deposit limits the issuer's risk. Some card issuers will transition you to a regular unsecured credit card once you've shown responsible use of your secured card.
Pay your student loans on time.
If you took out student loans to pay for college, your lender(s) will usually report your accounts and payments to the credit bureaus. Even if you defer making payments until after you leave school, student loans can help you establish credit—as long as you make your payments on time every month once you do start paying them back.
Take out a credit-builder loan.
Some lenders offer loans geared to helping borrowers establish credit. With credit-builder loans, the bank sets aside the loan amount (usually $300 to $1,000), and you receive the money after you've made all the monthly payments. You'll generally have to pay interest on credit-builder loans from banks and credit unions, but some may return all or a portion of that interest once you pay off the loan. Mission Asset Fund offers a no-interest lending circle program, which could help you build an emergency fund and your credit at the same time. In either case, these loans will help you establish credit and show future creditors you are a responsible borrower.
Add utility and telecom bills to your Experian credit report.
If you're living on your own and responsible for your cell phone bill and utility bills, you can add these accounts to your Experian credit report with Experian Boost™. Once they're in your report, your on-time payments may improve your credit history and increase your credit scores.
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This is not a sponsored post. Tips by Experian expert, Louis DeNicola