There are several ways a young person can start building a credit history:
- Open a secured account with a bank or credit union that reports their information to Experian.
A secured credit card can be a great way for a young person to begin building credit.
With most secured cards, you deposit funds into a savings account and receive a credit card with a limit that is typically a percentage of the amount you deposited.
Because secured cards use the amount you deposit to "secure" the amount you charge on the card, they are easier to qualify for. If payments are not made on time, the bank will simply withdraw the funds from the savings account. The bank will also report your payment late to Experian, so failing to pay a secured card on time has the same negative impact as not paying an unsecured credit card.
When applying for a secured card, check with the credit card issuer to ensure they report their secured account information to the credit reporting agencies. As long as the account is reported, making on-time payments and keeping your balance low will help you establish a positive credit history.
- Ask a parent or family member to add you as an authorized user on their credit card account.
Another way to build a credit history is by having a parent or family member add you to their existing credit card accounts as an authorized user.
As an authorized user, you have permission to use the credit card to make purchases but are not responsible for the debt. If the credit card provider reports authorized user accounts to Experian, being added to the account can be a good first step to building your credit.
Keep in mind that not all lenders report authorized user accounts to the credit reporting companies. Contact the credit card provider first to make sure they report authorized user account information to Experian and the other credit reporting companies.
- If you're renting, have your positive rental payments reported.
Whether you live in a single family house or a large apartment complex, having your positive rent payments reported to Experian can be helpful for building your credit history.
Check with your landlord or management company to see if they will report your positive rent payment history to Experian. If they don't already report your rent payments, ask if they would be willing to start. Once your rent payments are reported to Experian, your information will be included as part of your credit report and may be included in future credit score calculations.
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Scoped on: 12/11/2018
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