How new college grads can build credit

How new college grads can build credit

If you can take a second to plan ahead, an early start at building your credit record is important because it can help unlock your future financial goals more easily.

In this article, you will learn how new college grads can build credit!

You’ll need good credit when you go to apply for a credit card, car loan, or mortgage later on, but luckily, building your credit isn't as hard as it sounds. 

Here are the six best things you can do now to start.

1. Apply for a credit card

This might sound strange, applying for a credit card, and using it wisely is the fastest way to start building credit. FICO, the credit scoring model that most lenders use, weighs revolving credit such as credit cards heavier than installment loans such as your student loans.

2. Don’t miss a bill payment

Your payment history makes up 35 percent of your credit score. It's the single biggest factor that makes up your score. Even one late payment can drop your credit score, and when it's on your report, it takes a full seven years to fall off. 

3. Avoid accumulating credit card debt

Your credit utilization ratio — the amount you owe versus the amount of available credit you have — makes up 30 percent of your FICO score. It's the second-most important factor in your score, so it is important to take care of not falling into debt.

When you do use your credit card, aim to pay your credit card bill in full every month so you can avoid paying interests

How new college grads can build credit

4. Don’t close any student credit cards you may have

If you have used your credit card properly, it is a good idea to hang onto the student credit card or speak with your credit card company about having it converted into a non-student version. This way, you can keep your credit history open and growing with this particular card. The length of your credit history makes up 15 percent of your credit score. 

5. Pay down your student loans

Once you start earning money, paying down your student loans can boost your credit score. The more you pay off, the more of a benefit you'll see, and if you pay extra on your student loans, you'll pay less interest overall and be free of the debt sooner. 

6. Check your credit report for mistakes

Errors on your credit report might affect your credit scores negatively, so it's especially important to stay on top of checking your credit report.

You can get a free copy of your credit report from each of the three agencies once a year.  

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