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Quickstart Guide to Building Credit in Your 20 and 30s



Your 20s and 30s are a time filled with new adventures and milestones — first job, first home, and perhaps marriage and children. To succeed at all of these, you’ll need credit, something that can be a challenge to build early on in your career. As many as 26 million Americans live without a credit history, which makes it difficult for them to get a credit card or take out a loan.

Here are some suggestions to get the ball rolling and set you on a path to building a solid credit history.

Get a Credit Card

Even with a limited credit history, you can still qualify for a credit card, particularly those with low spending limits. At this early stage, make sure you can pay off the whole bill every month.

If a traditional card is beyond your reach, consider a secured credit card, which requires a cash deposit that typically matches your credit limit. This acts as a guarantee that you will pay off the amount you owe. You’ll get the deposit back when you close the account.

Take Out a Loan

When handled smartly, a loan can be a great way to quickly build your credit. Here are a few of the most common options:

    • Credit-builder loan: This type of loan functions as a kind of mandatory savings account. Your loan sits in an account until you repay it in full, then it’s released to you.
  • Secured loan: Your current bank or credit union may be able to provide a loan using the money you currently have on hand with them as collateral, often at a higher interest rate.
  • Installment loan: This includes any arrangement that requires regular (usually monthly) payments, such as an auto, mortgage, or personal loan.

Find a Co-Signer

If you have trouble getting a loan or credit card on your own, a co-signer may be a good option

. A friend or family member with good credit agrees to take joint responsibility for repayment of any amount owed. Be sure that both parties understand the risks involved. If you can’t pay, you risk damaging the co-signer’s credit, as well as your own.

Be an Authorized User

This is a variation on a co-signing arrangement, but instead of a second person signing on to your credit card, you become an authorized user on theirs. This can speed up the process of generating a FICO score (a credit score created by the Fair Isaac Corporation).

Pay Your Bills on Time

There are several services that can put ongoing bills — such as rent or utilities — on your credit report. LevelCredit and Rental Kharma are just a few of the companies that help translate your solid payment history into a great credit score. Though not every credit bureau includes these payments in their calculations, those that do can be a great help getting you started on that first credit card or loan.

There is one bill in particular that is essential to pay on time — student loans. If you are one of the majority of college graduates who have this kind of debt, your ability to make timely payments can have a significant impact (positive or negative) on your credit score.

Become a Credit Nerd

The best way to boost your credit score is to know all the tricks of the trade. Become an expert — that person in your circle whom everyone turns to with their credit questions.

Here are some good habits to establish (and then pass on to your friends):

Pay bills on time. This includes credit cards, loans, and all other bills. If you drop the ball on any of them, a collection agency could pick it up and that can torpedo any chance at good credit.
  • Don’t close credit card accounts. This can actually damage your credit. It may lower what’s known as your utilization rate, which is the ratio of the amount you owe to the amount of credit you have. Canceling a card can reduce the amount of credit you have, which can lower your score.
  • Keep your credit utilization down. Not only do you want to grow the amount of credit you have, but you also want to lower the amount you use. Stay in the neighborhood of 30 percent.

All of these principles can help generate your FICO score or VantageScore and keep them healthy.

Stay in It for the Long Haul

The journey to a strong, stable credit reputation begins in your 20s and continues throughout your life. No one action will make or break it overnight. Good credit grows as you take on more financial obligations (mortgage, a second car, saving for college) and meet them with consistent, on-time payments.

USALLIANCE has a wide variety of credit cards that can help you along the way, all with no annual fees and no annual percentage rates (APRs). Plus, current credit card members also get a free monthly credit score delivered to their inbox each month!