Building credit can be challenging when you’re just starting, but it’s an essential step toward financial stability. Good credit can help you get approved for loans, credit cards, and apartments. It can also affect your insurance rates and even your job prospects. Here are some tips on how to build your credit when you’re just starting.

Get a secured credit card.

One of the best ways to build credit is using a credit card responsibly. However, getting approved for a traditional credit card can be tricky if you have little or no credit history. In this case, a secured credit card is a good option. A secured credit card requires a cash deposit, which acts as collateral. The deposit amount is typically equal to your credit limit. Use your secured credit card to make small purchases and pay your bill on time and in full monthly.

Some banks offer student credit cards if you are in college or high school, which provide a small amount of credit to get your feet wet. These cards help establish credit and teach good habits when it comes to credit cards. 

Become an authorized user.

Another way to start building credit is by becoming an authorized user on someone else’s credit card. This is an arrangement where someone adds you to their credit card account, and you can use the card to make purchases. The account owner is responsible for paying the bill, but the credit card activity will appear on your credit report. Ensure the account owner has good credit and pays their bill on time, as any missed payments or high balances could negatively impact your credit.

Pay your bills on time.

One of the most crucial factors in building good credit is paying your bills on time. This includes credit card bills, rent, utilities, and any other bills you have. Late payments can stay on your credit report for up to seven years, significantly damaging your credit score. Set up automatic payments or reminders to ensure you never miss a payment.

Keep your credit utilization low.

Credit utilization is the amount of credit you use compared to your credit limit. High credit utilization can negatively impact your credit score. Try to keep your credit utilization below 30%. For example, if you have a credit card with a $1,000 limit, keep your balance below $300.

Don’t apply for too much credit at once.

When starting out, it can be tempting to apply for multiple credit cards or loans to increase your available credit. However, applying for too much credit at once can hurt your credit score. Each time you apply for credit, it triggers a hard inquiry, which can lower your credit score. Be selective and only apply for credit when you need it.

Monitor your credit report.

Regularly monitoring your credit report can help you identify any errors or fraudulent activity. You’re entitled to one free credit report per year from each major credit bureau (Equifax, Experian, and TransUnion). Check your credit report for accuracy and dispute any errors you find.

In conclusion, building credit when just starting out takes time and effort, but it’s worth it. Start by getting a secured credit card or becoming an authorized user. Pay your bills on time, keep your credit utilization low, and only apply for a bit of credit at a time. Finally, monitor your credit report regularly to ensure its accuracy. You can build a strong credit history and improve your financial future with patience and responsible credit use.