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Posted 27 July 2023

Beginning to Build Credit

Beginning to build credit can feel daunting. By starting slow and using credit responsibly, you can use credit to make your dreams come true. One option to jumpstart your credit history is becoming an authorized user on someone else’s credit card. Another option available to you is opening your own credit card and taking advantage of cards with lower interest rates for students.

Authorized Users

If you have someone you trust in your life that handles their credit responsibly, ask if you can be placed as an authorized user on one of their credit cards. Becoming an authorized user grants you access to the card’s line of credit, and you will be able to make purchases without being responsible for making credit card payments. The credit card is typically listed on your credit report, allowing you to establish a credit score. If the credit card is managed well, it should positively impact your score even if you do not personally use the credit card or pay on it. This can be a great way to begin your credit journey on a positive note.

Interest-Free Loans

If becoming an authorized user is not an option for you or you are looking for another step to take toward beginning to build positive credit history, investigate opening a credit card. Credit cards can be an interest free loan if you pay your statement balance each month. If you choose to do a cash advance off your credit card, interest will begin accruing on that date instead. Opening a credit card can be a good way to dip your toes into credit utilization. Evaluate your options to see which credit card will work best for you long term. Try not to apply for multiple credit cards within the same six months to prevent a drastic dip in your credit score due to multiple inquiries.

When researching credit cards, look for student rate discounts. For example, MSU Federal Credit Union and OU credit Union offer the lowest interest rate available to undergraduate college students attending a four-year accredited college or university. This is a great opportunity for young people beginning their credit journey to take advantage of the best rates. The advantage of opening your first credit card is that you can continue to use it for years to come since it is an open-ended line of credit, allowing you to establish a lengthy credit history. Using your credit card regularly and making on-time payments will help you build a positive credit history. Try not to exceed 30% of your credit card limit. For example, if your limit is $1,000, you should not exceed $300, especially if you are unable to payoff that amount at the end of the month. These tips will help you be successful as you use credit to achieve your dreams.

Beginning to build credit is a great way to set yourself up for success as you move through different stages in your life. Establishing a positive credit score using a credit card should allow you to qualify for the lowest rates on loans that require you to pay interest, allowing you to save money on your car, home, and other purchases. You can start by opening a credit card and using it responsibly to build a positive credit history. Another option you have is to be added as an authorized user on the credit card of someone you trust. This allows you to benefit from their responsible credit card usage. Choose an option that works best for you and enjoy the perks of starting your credit journey on the right foot.



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