Starting your credit-building journey early can help secure your financial future and set you up for increased opportunities, such as accessing lower interest rates and better benefits on different credit products. But how do you start building credit as a youth, teen, or young adult? Comparing different strategies, such as using credit-building credit cards, can help you determine which ones make the most sense as you work to build and maintain a good credit score.
A secured credit card looks and functions like a normal credit card, but you have to put down a cash deposit that typically acts as your credit limit. Using a secured card can raise your credit score if done responsibly. They tend to have less strict eligibility requirements, making them more appealing if you’re building or rebuilding your credit and can’t qualify for an unsecured card.
Two top secured credit cards include the Capital One Quicksilver Secured Cash Rewards Credit Card and the Capital One Platinum Secured Credit Card. If you want to earn rewards while building your credit, the Capital One Quicksilver Secured Cash Rewards is the better choice. Student credit cards are specifically designed for college students who want to build their credit history. Since students tend to have little or no credit history and want to open their first credit card, these cards don’t have as strict eligibility requirements as many non-student cards.
Student credit cards work the same as traditional cards, allowing you to make purchases on a line of credit and help build and establish a positive credit history. Two of the top student credit cards include the Capital One Savor Student Cash Rewards Credit Card and Discover it® Student Cash Back. They both offer cash-back rewards, giving students the opportunity to earn rewards and build credit at the same time.
An authorized user is someone added to another person’s credit card account. For example, a parent might add their child to their credit card for multiple reasons, such as giving their child access to funds, teaching them how to use a credit card and learn good financial habits, and helping build their child’s credit history. The child’s credit history can benefit from being on the account if the account owner is using it and making on-time payments.
Throughout your credit-building journey, focus on tracking and managing your money responsibly. Make on-time payments, only open what you need, keep accounts active, and keep utilization low to increase and maintain your credit score. It’s essential to remember that errors can be present on your credit reports and should be disputed. Check your credit score for free at AnnualCreditReport.com and dispute any errors through the major credit bureaus.
A credit-builder loan can help you build your credit by using a loan rather than a credit card. Just about any type of loan could help you build your credit, including student loans and car loans. Some bill reporting services, such as Experian Boost, could increase your credit score by reporting different bill payments. Young adults can build their credit history through secured credit cards, student credit cards, and becoming authorized users on established credit card accounts. Work toward achieving an 800 credit score by responsibly using different credit products.
Read more at Yahoo Finance: The 5 best credit-building strategies for young people