How to Build Credit

Learn to build credit yearly to unlcok financial freedom later in life.

Posted by Charles Fregozo on March 8, 2021

Having control over your future housing, auto loans, student loans, and even employment, credit is your financial power that needs to be developed early in your life. Establishing and maintaining credit early in life is essential to unlocking many benefits that otherwise would not have been available to you. However, because being approved to receive a credit card to start building credit is a difficult task, take into consideration some of these tactics to build credit at a young age to achieve some financial freedom.

Well, what exactly is credit and why should I care about it?

Dictating major decisions within your life, credit is a numerical value that indicates to banks and other parties how trustworthy you will be based on your financial history. A good credit score offers many opportunities later in life like the best rates on loans, credit cards, and home and auto insurance rates. Most notably, having a good credit score helps you in getting jobs or promotions as most employers ask to review your credit history or in receiving a loan to start your own business. Because a great credit score takes years to build, it only makes sense to start building credit as soon as you are able to in order to set yourself up to be financially successful in the future.

Becoming an Authorized User

The first and easiest way of building a good credit score is to become an authorized user on your parent or guardian's credit card, allowing you to receive the benefits of making payments on time without having to use the card. By being added as an authorized user on a responsible person's credit card, you are able to build a credit history without being financially responsible for paying charges on the account. This method is accessible to anyone older than 13 and does not require a source of income from the authorized user, making this method one of the easiest and safest.

Having your own credit card at 18

Although requiring a source of income in order to pay off balances on time and in full, signing up for a secured credit card at 18 or older that is designed to build credit can make your financial life much smoother in the future. To build your credit with a credit card the safest way possible, make small purchases every month followed by payments in full due before the payment due date. Once you have grown your score and have more income available, apply for a regular credit card to start developing your income even further.

Earning Credit when Paying Back College Loans

Lastly, because most of you will be taking out student loans to attend college, you might as well utilize this loan to help build your credit and increase the length of your credit history. To earn this credit boost, you need to pay off your installments of the loan on time and by the due date. Your on-time payments will show on your credit history and improve your credit for 10 years after it is fully paid off. However, missing even just one payment could severely hurt your credit score so use this unavoidable debt as an opportunity to help further increase your credit.

Final Thoughts

No matter the method you choose, paying off debt in full and when it is due is the key to maintaining and creating good credit. Achieving good credit allows you to unlock your full finical ability without the fear of creditors turning you down. Follow these listed steps to attain finical freedom for the rest of your life.