3 Ways for a New Graduate to Start Establishing Credit

It’s graduation time across the country and over 3 million teenagers in the United States will be graduating from high school.

Whether they plan on attending college, entering the workforce, or enlisting in the military, the one thing they will all have in common is the need to begin building credit.

How do you build credit when you don’t have any?

There are 3 primary ways for teenagers to begin establishing credit:

Apply for a Credit Card.  Sometimes students can get approved for a regular credit card and other times they may need to begin with a secured credit card.  With a secured card, you deposit a sum of money and then you can borrow against that deposit.  If the payments are made on time and the card is used responsibly, the issuing bank may eventually grant a regular credit card to the cardholder.  This is a common method use by anyone that needs to build credit, not just teenagers.

Become an Authorized User.  A parent can add their child as an authorized user on their credit card and this will allow the child to begin building credit.  There are, however, a few things to be aware of…  First, the primary cardholder is responsible for the payment, regardless of whomever makes the charges on the card.  Second, if the primary cardholder has a negative credit history on the card, those negative items could transfer over to the authorized user.  So before doing this, make sure that the card being used has a clean credit history and that everyone understands the impact of charges and payments made on the card.

Co-Sign for a Loan. A parent or family member can co-sign for a loan with the teenager.  For instance, if the family plans on buying a car for the teen to use or take to college, co-signing on the loan will give the graduate a chance to start building credit.  In this scenario, remember that all co-signers are equally responsible for payments.  So if a payment is made late or missed, it will effect everyone that signed for the loan.

Learning to Use Credit Responsibly

It is critical for teens to learn how to use credit properly, how credit scores are determined, and things that should or should not be done when it comes to maintaining credit scores.  To this end, Dedicated Credit Repair offers a Teen Credit Class that teaches kids everything they need to know.  If you or your child is interested in participating in this class, contact our office for all of the details.