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How are we supposed to build credit, without a credit score ?

Our responsibility as soon as we turn eighteen is to be independent and self sufficient. However, we’re never taught the right tools to know how to even get an apartment. How am I supposed to build my credit score, if no one trusts me enough to even begin?
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Holly’s Answer

I was able to establish credit by (1) getting a closed loop credit card, meaning the credit card only works for that store (think Kohls or Target) (2) getting and paying off a loan (ie. for my car).

Once you build up some credit, you'll open yourself up to more lucrative options.
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Rakesh’s Answer

Building good credit score is long term process; start with secure credit card and make sure that all the payments are on time, try to keeping the credit balance low, if possible; prepay the amount before the credit invoice is generated, avoid carry forward the balance or late with payment. It will be challenging initially but will help in long run.
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Yvonne’s Answer

Hi Karisma,


I totally understand your situation! I was in your shoe with no credit score and I had to build my credit score from scratch after graduating college. My suggestion to start is to get a secured credit card, it usually requires a cash deposit that serves as a collateral if you miss a payment, but it could help you build credit with responsible use. If you are a student, there are many options out there that provide a chance for students to build their credit score through a student credit card. It usually comes with a lot of promotional offers and rewards too! If the credit card option is not for you, buying a car and start paying auto loans on time/getting a student loan and pay the required amount on time could also help your credit score. However, keep in mind that if you pay these loans with cash, it won't help your credit. Another option would be for your parents/spouse to make you an authorized user on their rewards credit card. You will have a chance to build your credit while they may get reward points or cash back for every dollar you spend!


I recommend doing some research on ways to build credit without a credit score online, and be sure to consider the downside of each option that I mentioned. Good luck!
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Hannah’s Answer

Going to college can actually help you build credit. Federal student loans are considered a revolving account. Their low interest rate and deferred interest compounding make them an attractive option. Of course, the downside is that you will have to pay them back after you graduate. The length of time that you have a revolving account also impacts your score, so it may make more sense to keep the loan open even when you have the funds to completely pay it off.

Simultaneously, there are several credit cards geared towards students that most can get approved for with minimal or no credit. Although they may not have the most attractive benefits (not as much cashback or ways to redeem cash back), they will help you establish a long term account.

Finally, you'll want to build even better credit by monitoring your revolving balance and keeping it below 20%, paying the full balance off every month. You can ask your provider for an increase in your credit limit after a few years to help keep your revolving balance low even as your expenses increase.

Hannah recommends the following next steps:

Research the components of the credit score
Check your credit report at least once annually (annualcreditreport.com is federally required to give you one from each of the 3 main credit bureaus)
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Shae`la’s Answer

I think it's great that you are asking this question! Credit is extremely important to build as you plan to make large purchases (like a home, a car, etc). When I was in college, I was working only seasonally. I started by taking out a very small loan for a used car. I made sure that I made enough from my seasonal job to cover all of the payments for the year while I was in school. It's important to be reasonable with your planning (don't take out more than you can cover).
Until you have a steady income, I would be really careful with credit cards. You could start by getting a credit card and only using it to cover your gas, then pay it off IN FULL each month. This helps you keep your balance low (so that you can pay it in full each month) and avoid interest.
Once you have a steady income you could look at what credit card options are available that provide great benefits, potentially a larger car loan for another vehicle, and eventually a home loan. All of these steps along the way will help you to build a credit score.
Rule of thumb is to spend less than you earn (including credit cards, loans, bills/utilities, etc), always pay on-time and in full (this way you avoid late fees and interest rates), if you get behind make getting caught up your priority. It takes longer to build credit than to ruin it, so you really want to reverse any potentially negative dings to your credit score. Be smart - if you can't afford something, wait and save!
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Yasemin’s Answer

Hi Karisma! It can be difficult navigating all of this, but I would recommend to open up a credit card, and do minimal spending. When I was 18, I opened up my first credit card and bought my college textbooks and small purchases here and there. As a good piece of advice, never spend more than you can pay back. A credit card is helpful but it can be dangerous if you can't pay it back therefore be mindful of purchases. However, many credit cards have cashback opportunities so even if getting your college textbook or a cup of coffee can go a long way in building credit and getting 1% or such back on that payment. There are also "refer and get amount of dollars" such as through Discover; my brother had a Discover credit card and used the referral option to where we both received a pretty ok amount back in cash back. Therefore if you have someone who has a credit card they can refer you to apply for one too. In addition, if you want to wait, maybe you can ask your parent/older sibling/guardian or whomever you really trust with good credit and good spending habits to become an authorized user on their credit card. This can help build up your credit score and go a long way too, just make sure the person you are signing on with is financially responsible. It does take time but little by little your credit does build up. In the future for apartment renting, it is helpful to have a strong credit and good income- a cosigner can help if needed but it must be discussed and researched about throughly before asking someone to cosign. Please let me know if you have further questions.

Best of luck!
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Charlotte’s Answer

Hi Karisma,

Great question and very relevant today as there are a lot of different factors that go into your credit score that you wouldn't know (many adults don't even know). Yvonne is right that a secured credit card is one way to start building your credit score. If you have a parent that is willing and able, having them cosign on a loan (car loan or apartment lease agreement for example), or credit card is another way to start building your credit. There are several credit cards/accounts that are intended to build a young person's credit - you would be an authorized cardholder with a limited spending amount. As soon as you have at least 6 months of credit history under your belt, you will qualify for other forms of credit, but definitely start small and only what you're able to pay in full. Don't be fooled into paying only the "Minimum Amount Due," as that will lead to a lot of fees and interest. Slow and steady will win the race! I like the website NerdWallet for straightforward credit advice, and here's a good article for you:


https://www.nerdwallet.com/blog/finance/how-to-build-credit/


It is never too soon to start building your credit history - in today's world of PayPal and Venmo, there are limited ways to build your credit score, to the point where those in the industry are even questioning the utility of credit scores to determine if someone can pay on their loans. You will be ahead of the game if you start now by instilling some discipline in the way that you spend. Good luck!
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Brian’s Answer

Hi:

Your first step should be to secure employment and have a steady job. once you have dont this, you can apply for a credit card and get approved. Make everyone of your payments early and never be late. This will establish you some credit. Hopefully at that point you can rent an apartment and do the same and make timely payments without being late. At this point you are on your way to establishing credit. Hopefully your next step will be securing an auto loan and a home loan. Good luck!
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