In college, establishing credit felt about as pressing as an optional homework assignment. But now that you’ve graduated, it’s suddenly at the top of your summer to-do list, with a deadline of ASAP. And for good reason.
Good credit is your ticket to an easier and more affordable postgrad life. It could help you qualify for apartments, nab low-interest car loans, pay less for car insurance, set up utilities with little or no deposits, and more. And it’s not that hard to get started. With a few strategic moves this summer, you can make sure future-you is ready to clinch those savings.
See where you stand
If credit hasn’t been on your radar until now, you might not know whether you have it or not. So here’s where to start:
- Check your credit reports. The federally authorized site AnnualCreditReport.com offers free credit reports from each of the three major bureaus — Experian, Equifax and TransUnion — every 12 months. These list your credit accounts and payment histories, among other information.
- Check your credit scores. Typically ranging from 300 to 850, these numbers give you a bird’s-eye view of your credit. The most commonly used ones are generated by credit-scoring companies FICO and VantageScore. You can access these for free through certain credit card issuers and third-party sites.
Once you do this, you might discover that you actually do have credit — and good credit, at that.
Such was the case for Jennifer Jackson of Atlanta, now 27, who got her first credit card in college. Her dad also added her as an authorized user to a card with a positive credit history.
In school, “I didn’t know that I was building credit,” says Jackson, who founded the blog ADLT101.com. “I wasn’t doing it on purpose. But it ended up helping me.”
After graduating, that good credit helped her get a low-interest auto loan, which saved her plenty, she says. Now, as a millennial transition coach, she speaks to students in colleges and universities about how to prepare for postgrad life.
No credit? Get started
When you’re starting fresh — no student loans, credit cards or other credit — your to-do list is straightforward: Get an account that reports payments to the three major credit bureaus.
“You only need one credit account to have a good score,” says Barry Paperno, a credit expert and blogger at Speaking of Credit. “That’s all you need. I don’t want people to think the bar is so high for getting a score, or a good score.”
After six months of reporting from that account, you’ll have enough credit history to generate a FICO credit score, he notes. You’ll be able to get a VantageScore credit score even sooner.
Here’s how you can get going:
- Get a credit card: If you have no credit, you might have to start with a secured card, which means putting down a refundable deposit — usually around $200. You might also qualify for an unsecured card with your bank or a store-branded card.
- Take out a credit-builder loan: With these loans, the money you borrow is typically held in a bank account while you repay the loan in installments. Afterward, the money is released to you.
- Become an authorized user: Jackson’s dad added her as an authorized user on one of his cards while she was still in school. “I had a really old car in college. He said, ‘OK, I’m going to put your name on this card so you can use it if you need to go get some repairs done on your car.’” Because he had managed that card well, it lifted her score, she says.
Already have credit? Cultivate good habits
Finding out you’ve built a solid credit history without trying can feel like passing a test you didn’t study for: It’s a relief, and a little exhilarating. But resist the urge to mentally check out. To keep that score in good shape, you need to continue building a positive payment history, which means keeping your balances low and paying loans, credit cards and other accounts on time. Be aware you can do this on a credit card without carrying debt from month to month.
“There’s nothing to be gained by running a balance,” Paperno says. “There’s plenty to lose, particularly the high interest you’re going to pay.”
By paying in full and on time, you’ll avoid interest charges and penalties — and keep your score healthy.