How Can A Young Adult Start Building Good Credit?

Building credit as a young adult can make a world of difference as you age. Credit not only allows you to purchase things like cars, electronics, and other big-ticket items, your credit can also be vital in helping you do things like start a small business or purchase a home.

Young Adults and Credit Cards

Young adults, particularly college students, and credit cards seem to go hand and hand; many of those away from home for the first time can’t wait to get their hands on a piece of plastic freedom. In fact, over 80 percent of college students have at least one credit card. More than 50 percent of freshmen have them, as do more than 90 percent of sophomores. The vast majority of graduate students carry them as well.

When it comes to the future, a credit card can end up being a good thing or something that amounts to a heap of debt. It depends on how responsible you are with what you may have deemed “the fantastic plastic.”

How Can A Young Adult Start Building Good Credit?

Building Credit Responsibly

Prior to obtaining a credit card, there are several things a young adult can do to prepare. You may want to talk to your parents about the do’s and don’ts of spending, and you should learn the way credit cards make money. Study things like terms, interest rates, and the hidden charges credit cards are famous for.

Other things you should remember, per CBS News, include:

Getting a Credit Card Appropriate for You: Even if you somehow qualify for a gold card, that doesn’t mean you should be jumping to get one. Consider building your credit by starting small. You may want to use a pre-paid card, a secured card (one that reports activity to credit watchdogs), or one with a limited credit line.

Use Credit Cards Wisely: Though it’s tempting to take your new credit card to your favorite watering hole and buy a round for everyone, this is not an example of using your credit card wisely. Instead, use your credit card for things you actually need, try not to charge more than 30 percent of your credit limit (going higher will result in high interest rates), and refrain from taking out a cash advance. Cash advances have very high interest rates and the interest starts accruing as soon as the cash advance is made.

Get Other Forms of Credit: A credit card is likely the easiest type of credit to procure (college campuses practically pay you to get one), but obtaining other types of loans can help make your credit stronger. This could be an auto loan, a personal loan, a student loan, or even something like a gas card.

Pay Your Bills on Time: Paying things like your cable, your phone, and your electric bill on time might not go a long way in building your credit. But, failing to pay and having a collection agency pursue you can damage your credit for years to come.

Keep Your Unused Accounts Open: It may seem prudent to close your credit cards when you are done using them, but keeping them open helps your credit score. This is because your credit score, in part, takes into account how much available credit you have. Often, the more available credit you have, the higher your credit score. An unused credit account, with a limit of $5,000 for instance, can go a long way toward increasing your number to one that impresses even the stingiest creditor.


Paul Cook writes on credit, insurance, finance, business, commerce, investment and other related areas. Being a good renter is one way of establishing credit; for those who elect to go this route Paul recommends renters insurance from Protect Your Bubble.

Image credit goes to Will Christensen.

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