Going from college into the workforce can be extremely overwhelming. You assumed you would learn so many things in college about practical life skills. The thing is, you’ve probably never learned in school about how to build your credit post-grad.
It’s not uncommon to feel like you missed the lesson on how to do basic adult tasks. You probably thought you would know more about adulthood before being thrown into it. Guess not, huh?
The concept of credit itself might seem confusing. What is credit? And how do you “build it” if you don’t know how to get it in the first place?
Understanding how credit works shouldn’t be just for the accounting majors. You can successfully build your credit post-grad by taking a few easy steps.
How does credit work?
Credit may seem like a complicated idea, but it’s pretty simple. Credit is how much credibility you have to pay back what you owe.
Lenders consider you more trustworthy if you take good care of the money you’re given. You have to make agreements to borrow money and pay that money back in a certain amount of time.
Credit scores make a little more sense when you see them in this light. Every action that you take can play into your reliability as a borrower.
Why is good credit necessary?
Having good credit means having financial credibility. Your credit score helps businesses and banks trust that you can handle certain financial responsibilities.
Think about all the loans you will need in the future- buying a car, a house, etc. You will want to be on the bank’s good side, and building your credit is the only way to get there.
It’s important to be aware of how you use your money. Most people aren’t aware of how much their spending affects their credit score. If that makes you nervous, don’t worry. There are ways to build that credit score so that you can look like the responsible adult that you now are.
How do you build your credit?
Get a credit card.
This is the most obvious way of building credit. However, there’s a paradox that every young adult seems to bump into. You need good credit to get a lot of credit cards, but you can’t get good credit until you have a credit card.
Although this system seems immediately overwhelming, there are ways to build your credit without a credit card. There are even credit cards specifically for people with no credit! Many credit card companies are aware of this frustrating paradox and are willing to help you in your credit-building journey.
Look into credit-building loans.
These loans are kind of like training wheels for building your credit. The only purpose of this loan is for you to pay it back to get credit. It’s as simple as that!
Pay off loans.
As a new graduate, you have a few opportunities to start building your credit properly. The first way is to begin paying off those student loans as soon as possible.
If you have student loans, you’re already heavily affecting your credit score, whether you know it or not. Begin paying off those loans as soon as you can and focus on staying consistent. Don’t miss any payments, or your credit score will pay the price!
The same goes for your other payments. Pay your bills on time, and you can easily prove that you are a trustworthy financial partner or customer.
Don’t let credit freak you out!
Credit may seem daunting, but it’s really about taking one smart step at a time. Try not to stress how every move you make may affect your credit score. The most important rule to follow is not to spend money you don’t have so you don’t have problems paying off credit card debt.
Take it step by step, ask for help, and be smart with your money. You’ll be properly “adulting” in no time!
