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Establishing Credit

What Living at Home as a Recent College Grad Means for Your Credit

Millennials have often been referred to as the "boomerang generation" because they move home after graduating college more frequently than previous generations. In fact, nearly a quarter of millennials live at home with their parents, according to Zillow.

Frequently, the idea behind moving home after college is to save money and build a strong financial foundation. However, while there is a lot of financial upside to living at home, building credit can be a challenge.

Living at Home: A Roadblock to Credit?

Often, the whole purpose of moving home is to have fewer expenses. And while in most ways that's a positive, it can severely hinder your ability to build credit. Living on your own generally presents more situations that result in building a credit history, such as taking out lines of credit or paying bills such as utility bills that can be reported to credit agencies. The caveat to moving home to save money is missing out on these opportunities to bulk up your credit file.

Graduating to Credit

In general, recent graduates are new to managing their own finances. As a result, they probably don't have much credit to begin with. And building credit tends to be a chicken-and-egg situation: You often need to have credit to be approved for more credit. But how can you be approved for credit if you don't have any?

Building for the Future

Why do recent grads need credit anyway? Credit cards can be risky if not used properly, so it's understandable to be hesitant to dive into the world of credit. However, credit is a vital part of your overall financial health. And if you have goals of eventually buying a car, owning a home or applying for insurance, you'll need a credit history. Having a credit file—and a good one at that—can also mean the difference between snagging a high or low interest rate when it comes time for a car loan or mortgage.

In fact, having a low credit score can cost you thousands of dollars in interest throughout your life. So when you do build your credit, you want to make sure you do it right. The longer you wait to start your credit journey, the more difficult it will be. Therefore, beginning to build your file at a young age can help set the stage for a more productive financial future.

Starting Out

Recent college graduates living at home have a number of options when it comes to building credit:

Become an Authorized User

One of the most common methods to begin building a credit file is to become an authorized user on your parent's credit card. However, make sure your parent has good credit and sound financial habits, or it could backfire and negatively affect your score.

Open a Secured Credit Card

Another option is to open a secured credit card. These cards take a deposit, which becomes your credit line, so you're borrowing against your own money. Secured cards pose little risk to the lender and are a great way to generate a positive payment history. Often, if you're paying off your card in a timely fashion, lenders will offer an upgrade to a standard unsecured credit card.

Consider Other Credit Card Options

If you haven't been able to get other types of credit cards, you could consider a retail or gas credit card. These are often the cards credit newbies can qualify for most easily—but they should be used as a last resort. These cards often carry high interest rates. The best way to avoid that, however, is to only charge what you can afford to pay off in full each month. Not only will you avoid high interest rates if you do so, but you'll start your credit history on the right foot.

When deciding whether to move home after graduating college, it's important to consider all factors. Saving money is certainly a sound financial decision. And while the challenge of building credit while living at home is often overlooked, there's hope! Recent grads living at home have opportunities at their fingertips—it's just a matter of recognizing the challenge and taking advantage of the opportunities.


Editorial Disclaimer: Opinions expressed here are author's alone, not those of any bank, credit card issuer or other company, and have not been reviewed, approved or otherwise endorsed by any of these entities. All information, including rates and fees, are accurate as of the date of publication.

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