Millennial Money: Now is the time to build your credit

Sooner than you may know, your creditworthiness will play a role. Here’s what you need to know.

Sooner than you may know, your creditworthiness will play a role.

A solid credit rating can make the difference between qualifying for an apartment, a low-interest car loan, or missing out on something. To have loans ready when you need them, now is the time to build a good and long credit history.

There is more than one way to get a loan, and it could be as simple as reporting your ongoing bill payments to the major credit bureaus. But remember: credit building takes care, especially since missing payments can hurt your score for years to come.


Your credit score is a number, usually between 300 and 850, that is calculated based on how reliably you have paid off past debts, such as credit card bills. Lenders use your creditworthiness to predict how likely you will be to repay debt.

Your creditworthiness helps determine the loans you can get, the interest rates you will be billed, the credit cards you can qualify for, and the properties you can rent. An employer can even check your credit history. Good credit can save you money later, especially on lower interest rates, when you secure a loan.

If you start with no credit history, you are not alone. In the United States, according to the Consumer Financial Protection Bureau, nearly 40% of people between the ages of 20 and 24 have little to no credit history to use for a score. Unfortunately, the same applies to around 20% of the population.

Building your credit may seem overwhelming if you haven’t already thought about it, but there are many strategies you can employ even if you are just getting started. Start by establishing good debt handling habits, such as: For example, don’t take on more debt than you can afford, says Brittany Mollica, a certified financial planner based in Chapel Hill, North Carolina. Missing payments will hurt your score and could become a burden if you need to borrow in the future.

“It’s really important to learn to always pay your bills,” says Mollica. “You don’t want to climb out of a hole full of credit card debt that you have amassed, especially if you start early.”


Credit cards can be a great tool for building credit, but they can also hurt your score if you take on more debt than you can handle.

If a parent or other trusted person in your life has a high credit limit and a long history of on-time payments, you could become an authorized user on their account and benefit from their good credit history. This is one of the easiest ways to extend your credit score, says Blaine Thiederman, a certified financial planner in Arvada, Colorado.

Becoming an authorized user also affects your loan utilization rate, or the amount of money you owe to lenders divided by the total balance you have available, which can improve your credit score.

If you have your own income, you can apply for a credit card from the age of 18; Otherwise, you will have to wait until you are 21 years old. A secured credit card is usually the best credit card to start with. A cash deposit secures these cards and since the credit card company can accept this deposit if you miss payments, people with short or poor credit history may qualify.

The down payment you need to pay for a secured credit card can be a burden and if so, an alternative card might be better for you. These cards use income and bank account information to determine your creditworthiness, not your creditworthiness.


If you live independently, you can report payments for rent, utilities, and phone bills to credit bureaus. So paying these bills can add to your balance if they are on time and you have reported them.

Unlike credit card payments, these payments are not reported automatically and may require a third-party service like Experian Boost or UltraFICO to alert the credit reporting agencies of your payments.

Keep in mind that these services sometimes require a fee, and reporting your bill payments may not always affect your creditworthiness. Instead, they may only appear on your credit report.


Making regular payments on loans can also help you build your credit. And even if you don’t have a credit history, some loans are available.

Loans of credit creation rely on income, rather than credit, for approval. If approved, the loan will be deposited into a bank account and will be available once you have paid off. Your monthly payments are reported to the major credit bureaus.

Student loans are another loan that you can use to build your credit when you are just starting out. Federal student loans do not require credit to qualify, while most personal student loans do. Paying back your loans will help you improve your credit score, and you can start making interest payments while you are still in school.


This column was provided to The Associated Press by the personal finance website NerdWallet. Colin Beresford is a writer at NerdWallet. Email: Twitter: @Colin_beresford.


Data point: Credit Invisibles

NerdWallet: Does Paying Bills Build Up Your Balance?

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