Hoping to own a home one day? It's not likely you'll be able to pay out of pocket, so you'll need a good credit score to qualify for a mortgage. Ready to purchase a new car? You'll need a good credit score for that, too.
Why Your Credit Score is Important
Building credit can be dangerous, but a necessary game. A good credit score can make or break a lot of financial endeavors, such as getting an auto loan, applying for an apartment, or qualifying for a mortgage.
Before the Great Recession, credit card companies targeted young adults looking to build their credit score with high-interest rate credit cards and loose qualification guidelines. As a result, many young professionals found themselves building up unmanageable levels of debt. Thankfully, there are more regulations to limit this risk. Yet, Americans still find themselves buried under their debts, with plummeting credit scores. As your life-long financial partner, we want to equip you with the information and tools that will help you build your credit responsibly.
Ways to Safely Build Your Credit
A good credit score doesn’t happen overnight. If you don’t have a credit history, there is no proof of responsible credit use to improve your score. Applying for a credit card may seem like the simplest way to build your credit, but there are some alternative ways to acquire a credit history:
1. Put Utilities & Other Recurring Payments in Your Name
The easiest way to build credit it to put your name on expenses you’ll already need to cover, such as utilities, rent, and other monthly expenses. While not every credit score bureau takes these payments into account, some do consider a history of on-time payments as part of your credit history and scoring.
Quick Tip: If you find that utility companies won’t accept your name as the sole owner of contract or account because of lack of credit history, use a parent or guardian as a co-signer.
2. Become an Authorized User
If a family member or significant other already has a credit card, becoming an authorized user of an account in good standing could also help build your credit history. The card’s payment history will be recorded in your files and contribute to a positive score if paid on time.
3. Apply for a Credit Card or Loan
If you feel confident about your ability to make payments on time, in full – taking on some debt may be another good option to build your credit history.
When applying for a credit card, it’s important to consider a few things to make sure you don’t find yourself buried in interest charge debt. We recommend only using it to cover the necessary expenses that you know you can payback.
If you’re more comfortable with a loan, co-signing on your student loan may be the best route. Sixty-five percent of students in 2019 found themselves graduating with some amount of student loan debt. While taking on this kind of debt can seem daunting, it’s an especially safe solution if you have a co-signer that will help you pay off your debt over time.
We’re on Your Team
Beyond the digital tools available in Varsity on the Go, you can count on our team to provide trusted advisement on your finances when you need it.