How Recent Grads Can Build Credit

Making the transition from high school to college means you're in store for some significant changes in your life. Among those changes is the need to establish credit and build a solid credit score.

Your credit score is one of the most important things for you to nurture as an adult. It will affect almost every purchase you make on credit, your auto insurance rates, and your ability to rent an apartment. It may even impact your ability to get employment in desirable industries. 

Unfortunately, it isn’t easy to build credit if you don’t already have a credit history. Lenders are reluctant to extend credit without it. So, how do you build credit if you don’t already have credit? At Genisys Credit Union, we want to help our members do just that. Here are a few steps you can take to begin building a strong credit history and develop a great credit score.

1. Obtain a Secured Credit Card

Secured credit cards allow lenders to assume almost zero risks when extending credit. The premise is simple. You deposit an amount - for example, $500 into your credit account to establish a $500 credit limit. You use your card as you would a normal credit card and repay your balance. 

If you are unable to make the payments, the financial institution uses the funds put aside in your account to pay the balance. This is why lenders assume little risk when extending these credit offers. 

Every time you make your monthly payment on time, this will be reported to the credit bureaus, helping you build credit. Additionally, obtaining a secured credit card offers an excellent introduction to help you manage credit and discover the potential pitfalls credit card debt represents.

2. Take Out a Secured Loan

Secured loans work very much like secured credit cards. You deposit a specific amount into an account with a financial institution, such as the credit union, and they loan you the amount you deposited. You must then repay the principal of the loan, plus interest. Fortunately, the interest on these loans is typically low, and repaying the balance over time helps you establish a good credit history.

3. Secure a Credit Builder Loan

Credit builder loans are different from secured loans. While they sound the same on the outside, the way they work is quite different. These loans are specifically for people who have poor or no credit histories to build up their credit score.

With this loan, no money is required upfront. Instead, you pay the lender each month a predetermined amount. Your payments go into a savings account with your financial institution, and you will get this money back at the end of your loan. 

It’s easier to think of a credit builder loan as a savings account you’re required to fund each month. Monthly payments are reported to the credit bureaus – helping to build your credit history and score. Lenders do charge interest rates on these loans, but they are typically minimal. Credit rebuilder loans will vary slightly with each lender, so it’s important to research all your options.

We’re Here to Help!

There are many aspects of building credit that can seem difficult for people entering the world of credit for the first time. 

Let us help you get the answers you need about secured credit cards, secured loans, and credit rebuilder loans so you can use them to build your credit stronger and faster.

Call or visit one of our convenient branch locations to get started today or visit our Financial Wellness Toolbox for more information on building credit.

 

© Genisys Credit Union and www.genisyscu.org, 2021. Unauthorized use and/or duplication of this material without express and written permission from this site’s author and/or owner is strictly prohibited.  Excerpts and links may be used, provided that full and clear credit is given to Genisys Credit Union and www.genisyscu.org with appropriate and specific direction to the original content.

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