I am not a professional licensed to give financial advice so please make decisions at your own discretion. I’m just trying to help people understand their finances rather than being sued. I’m also not making any money from promoting these links or products. I just really like them. Thank you!
The first step in building credit is to first know what credit is and also the factors affecting your credit score. If you don’t know any of them or maybe just want to have a quick peek, I recommend you do that first. If you do already know all that, let’s get started!
So I want to start off by saying that it probably won’t be all that easy to start your credit-building journey. At least not at first. Much like the entry level job paradox; how are you supposed to show you have a history of being responsible with money if no one will lend you any money? Here are some fairly easy ways to do so:
Become an Authorized User on a Parent’s Account
For starters, you may be lucky enough where one of your parents/significant other may be able to put you on his/her credit card. This is called becoming an authorized user. As an authorized user, you will have access to using the credit card while also enjoying the fact that it starts building your credit history.
Not every card/line of credit has the ability to do this, so it is important that you and the primary cardholder ask if the card issuer reports authorized user activity to the credit bureaus. This line of credit is legally on the primary cardholder’s name so be sure that he/she agrees to all the terms and conditions and that you are aware of the obligations expected to by the primary cardholder.
Apply for a Secured Credit Card
When first starting out your credit building journey, most lenders will be quite hesitant to loan anything to you which is why secured credit cards can be a great thing to have. This kind of credit card can be a little confusing but think of it as a credit card backed by a cash deposit you make upfront.
You’re most likely not going to be getting a large limit with these kinds of cards. Nerdwallet shows a few options and they seem to range from a $50 – $200 deposit with a matching limit. For example, you put a deposit of $200 so your limit is $200; you essentially borrow against yourself and show you can pay the balance and any interest that accrues for an extended amount of time.
The trick with these is to try and raise your score enough where you can apply for a real credit card. These aren’t meant to be kept forever though it might hurt your score to close the card. Mainly due to the drop in credit history.
Apply for a Credit Builder Loan
These are a little less traditional and not as widely seen or advertised but can be very helpful. Credit Builder Loans also go by Fresh Start Loans” or “Starting Over Loans” and are typically offered by smaller financial institution and credit unions. These loans essentially approve you for a certain amount, deposit that loan into an account not accessible until after you make your last payment. Very much like a weird sort of savings account.
For example, let’s say you were approved for a $500 loan and it gave you 12 months to make payments. The $500 would be put into that “savings account” and you’d be expected to make monthly payments of whatever amount was agreed upon. After your last payment, you would essentially be 100% entitled to the money and do with it what you wish. As long as it’s legal of course 
Get a Co-Signer
To co-sign essentially means that the person is taking financial responsibility for you if you are not able to make the payments; it’s a HUGE burden to place on someone. Please don’t ask anyone to do this for you if you know you’re irresponsible and will max out your credit cards or not make payments. Treat this as a privilege.
If you’re lucky enough to have someone vouch for you, either a family member or a significant other, then this may a route for you. Be sure the co-signer understands his/her responsibility for you financially and don’t make their life harder for helping you out.
My Credit Journey
The steps I took when I first started this crazy credit-building journey was to apply for an unsecured credit card with the Capital One Journey Card. I applied for this card right when I had turned 18 and was working a minimum wage retail job while in college. I was very surprised I was approved for a $300 limit with the condition that if I made payments every month for 5 or 6 months, my limit would be increased to around $3,000. Six months of consistent payments later, and sure enough, a nice increase in my limit happened.
I took care of that credit card like it was my baby; paying it off almost completely every month. Then one day I got in a bad accident where a person T-boned me after running a red light and I had to get a new car. Luckily I had a decent paying job and my credit was good enough where I could finance the car on my own so I welcomed a car loan to my credit mix.
Next came the day I applied for a personal loan to help pay some expenses I had racked up. I could have put them on my credit card but the interest would have been higher so I added a low interest personal loan to my credit score from my credit union.
About a year after my significant other and I moved in together, we gradually added one another to our credit cards as authorized users which helped both our credit limits and credit history.
Recently I have paid off the car I financed all those years ago and financed a much cooler and nicer car. I went from a dorky 2011 red Ford Focus to a sleek gray 2017 Volkswagen Jetta.
I’m personally pretty happy with my credit score at the moment. It’s high enough where my APR is very low and I could get approved for just about anything with low-interest rates. I don’t think I hold the secret to the perfect credit score or anything but I do think simply caring for it like you would a fragile fire is more than enough.
Consider using CreditKarma to check out your credit score. They’re not paying me a cent to post that, I just really like using them and it’s 100% free. I didn’t have to put my credit card info or anything. Neither is Capital One for the mention of their Journey Card. I just like using them.
