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For young adults, one of the more intimidating and confusing things you need to learn is how to build credit. Like taxes, this is not something that is taught in schools, but is of great importance to someone and their future. If you ever want to make a big purchase, like a house, chances are you are going to need help from a bank in the form of a loan. To get a loan with a low interest rate, you will need to have a good credit score.

To get started, a credit score is a number assigned to someone by credit bureaus. This number represents how well a person handles his or her money and is based off of certain values. These credit bureaus look at how well a person makes credit payments and if they are on time or not.

Often times for people new to the world of credit, it can be difficult to get started. This is often due to the fact that many companies require a person to have a good credit score before giving that person a card. Creating a credit score can be difficult without a credit card, but it is not impossible. There are ways to build a person’s credit score up from nothing.

  • Secured Credit Cards
  • Student Credit Cards
  • Retail Credit Cards
  • Become an Authorized User
  • Get a Credit Builder Loan

The 3 cards types mentioned above are easier to get, but they tend to have lower credit limits and higher interest rates. However, they are decent starting points for building credit.

Another way to try and build credit is to become an authorized user on a friend or family member’s credit card. By doing this, the card can affect both users’ credit scores. The down side to this, is if one person messes up and misses a payment, both scores are affected.

Lastly, a person may be able to get a credit builder loan from their credit union. Essentially, the person gets a small loan from the bank, but instead of actually getting the money, it is placed into an account. The person then pays off the loan over the course of a year or so. Once that is done, the funds, plus interest, are given to the person who took out the loan.

The important thing to note with credit scores, is how touchy they can be. Bringing a credit score down is easy. All someone has to do is miss one payment and that can negatively affect his or her credit score for the next 7 years. This means it is extremely important to always make credit payments on time, and to try to avoid reaching your credit limit on your card as much as possible. You want to show the credit bureaus that you are responsible with your money, and that you do not spend more than you can afford to.

With a good credit score, buying a car, getting a loan, or buying a house for the first time will be easier. Lenders will be able to see that you know how to handle your money, and will offer you lower interest rates because of that fact. That is why it is important for young adults to build a good credit score.