Letter to New Grads: Let's Build Your Credit!

Eight tips for starting off your post-college life on the right foot.

May 25, 2014 at 9:30AM

Dear new grads,

Congratulations, you've made it! Your four-plus years of hard work have finally paid off and you're ready to take on the world with diploma in hand. With any luck, you'll be offered a decent-paying job in your field that pays the bills and challenges you every day -- in a good way!

Along with a better income, you're probably going to want to upgrade your lifestyle a bit. Which is fine, as ramen noodles and four-year-old futons aren't exactly conducive to a happy and healthy adult life. However, before you start flaunting your newly found baller status, let's talk about your credit.

I know, I know. You just finished exams -- the last thing you want to do is learn about credit! But I promise you, building and maintaining your credit really isn't that hard, and it will be so worth it.

Why? Well, unless you plan on crashing with your parents until retirement, you're going to need a healthy credit score at some point. Credit scores not only determine credit terms for loans and credit cards but also can mean the difference between having and not having a cell phone, an apartment, or even a job.

You probably want those things, so follow these simple tips to building a positive credit history and a great credit score.

1. Open a credit account if you haven't yet. If you don't have a credit history just yet, the easiest way to start building your credit is by applying for a credit card. Those without any type of credit history may need to start with a secured credit card and then upgrade to an unsecured card. Here are a few secured card options!

2. But open only one at a time. New credit applications can hurt your credit, especially when your credit history is short. After applying for your first card, wait about a year to open another new account. Start slow -- you can apply for more accounts after you've built up a decent credit history.

3. Pay your bills on time, every time. The No. 1 thing you can do for your credit is make 100% of your payments on time. Not 99% of your payments, 100%. Payment history is the most important aspect of your credit score.

4. Minimum payments? You can do better than that! Unless you're unable to pay your other bills, you should be paying a lot more than the minimum. You're a college grad -- clearly, you don't just do the bare minimum.

Ideally, you'll want to pay off the entire balance of your credit cards each month to avoid accruing interest. And if you think a good rewards card will make up for the interest paid, think again.

5. Get rid of your existing debt. Whether it's student loans, credit card debt, or an auto loan, it's time to make a plan to wipe out your debt. I know you're making more money now, but make sure you aren't spending it all on an upgraded lifestyle.

Buy a real mattress and stock up on veggies, and then start aggressively attacking that debt. As your credit utilization ratio goes down, your credit goes up.

6. Understand the magic that is compounding interest. Interest can be awesome or awful, depending on what side of the equation you're on. If you're paying off debt slowly, you're going to pay a ton of interest over the life of your loans. However, if you get any debt paid off quickly and avoid carrying a balance on your new credit card, you can invest and earn interest instead of paying it.

7. Be patient. You spent years earning your degree, and you'll need to spend years building up a positive credit history. By making all of your payments on time, paying down any existing debt, and not applying for too many credit accounts at once, your credit score will flourish.

But it will take time. Be patient and enjoy the climb toward 850. I assure you it will be much easier than the climb to graduation day.

8. Pull your credit reports annually to check for errors. Credit reporting bureaus aren't infallible, and you should be pulling reports from all three reporting agencies -- Experian, Equifax, and TransUnion -- each year to check for discrepancies. Don't worry, it's free! Just go to AnnualCreditReport.com to get your reports.

Congrats again, new grads! Now that your education has been extended to how to build good credit, you'll be unstoppable.

Your credit-savvy friends at NerdWallet

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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