Graduating from college is a major life milestone that should be celebrated. It’s stepping over the threshold from years of education into a new world. One thing you’ll learn (if you haven’t already) during your transition out of college is that your credit history will help you rent or buy a home, purchase a vehicle, get approved for a credit card, etc. To put it plainly, you need to build credit in order to get credit. How’s that for a catch-22?!
If you’re a recent college grad who’s learning how credit works and looking for ways to build credit history, here’s how you can get started:
- Start paying your student loans.
If you have student loans, making timely payments every month can help establish a positive credit history.
- Apply for a secured credit card.
A secured credit card (which is backed by a cash deposit) is intended to help you establish credit so that you may qualify for unsecured credit cards (that don’t require the borrower to make a deposit) and make other large purchases on credit.
- Pay your bills on time, every time.
Making on-time payments is a great way to improve your credit and build good credit history. You can set up automatic payments and/or electronic reminders to help you stay on track with monthly payments.
- Keep your credit utilization low.
Your credit utilization ratio is how much of your total available credit you use. Most experts recommend using no more than 30 percent of available credit on any card. So, for example, if you have one credit card with a limit of $5,000, your recommended credit utilization ratio would be $1,500. Also, since the amount of credit you use in relation to your total credit limit accounts for 30 percent of your FICO score (see linked article above), it’s best to keep it low. A general rule of thumb is the lower your credit utilization ratio, the higher your credit score.
- Get auto financing for bad credit or no credit.
Subprime financing is credit available to people who may have otherwise been turned down by traditional lenders or finance companies due to having bad credit or no credit. So, if you’re a recent grad with no credit history established and are in the market to purchase a vehicle, you could qualify for subprime auto financing through a car dealer enrolled on the Credit Acceptance program. Moreover, since we report to the three major credit bureaus, you can build credit history with on-time car payments.
Simply fill out the form on our website and we’ll connect you with a car dealership in your area that can help you get approved for auto financing!
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