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by Maurie Backman | Updated July 21, 2021 - First published on Dec. 9, 2019
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New to the real world? Here's how to establish a credit history and boost your score.
Congratulations -- after years of hard work, you're finally walking away from college with a degree in hand. But now comes the tough part -- adulthood. And if you're kicking it off without great credit, you may find it more challenging than expected.
Many people graduate college with poor or mediocre credit scores, and that's partially due to the fact that they don't have much of a credit history behind them. But the sooner you can build credit, the better-equipped you'll be to qualify for an apartment lease, auto loan, or credit card, so use these tactics to boost your score as quickly as you can.
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If you graduated college with debt, you actually have a key opportunity to build credit. Whenever you pay bills on time, that information gets reported to the three major credit bureaus -- Experian, Equifax, and TransUnion. The more on-time payments you have on record, the more your score will rise. Therefore, if you keep up with your payments, you'll have an easier time boosting your credit score.
Many college grads move back home after their studies to save money on rent. It's a smart move, but one drawback is that with your parents in charge of things like utilities and cable, you may not be able to establish a payment history. That's why it's important to get at least a few bills in your name, and pay them on time.
If you have a family cell phone plan, you might consider switching to an individual plan so you can have your name listed as the responsible party for that bill. Or, offer to take over your parents' cable bill -- it's a nice gesture on your part in exchange for free rent, and it gives you a chance to make those crucial timely payments.
It's not uncommon for credit reports to contain errors, and if yours has a mistake that works against you, like an outstanding debt you never actually racked up, building credit could prove to be an uphill battle. You're entitled to a free copy of your credit report each year from all three reporting bureaus, so request those copies online and study them carefully. And if you do spot a mistake, report it to the bureau that issued the report in question at once.
A secured credit card doesn't give you much in the way of buying power, but it can help you build credit. With a traditional credit card, you get approved for a certain spending limit based on your creditworthiness. With a secured credit card, you put down a deposit that serves as your credit limit, reducing the risk to the card issuer. If you spend responsibly on that card and pay your bills on time, those payments will be reported to the credit bureaus and help your credit score.
You may be eager to build up your credit as fast as possible, but prepare to be a bit patient. Establishing a credit history takes time, and if you've never paid your own bills before, it could take months to see changes in your credit score. Hang in there, because if you employ the above tactics, your score should slowly but surely improve. Once it does, you're likely to find it easier to navigate the next stage of life.
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