How Can Young Adults Build Credit?

Get Car Financing
Even with poor credit.

By

Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


, - March 2, 2018

As a young adult, it can be hard to know where to begin building credit to get set up for later in life. Whether you’re a young person just starting in the credit world, or you have one in your life, here are some simple ways to start building credit today.

Why Start Building Credit Now?

When purchasing big ticket items in life, like a car or house, lenders use a borrower’s credit to judge risk. Credit history is one of the biggest factors because it shows how responsible a borrower has been with money in the past. Along with credit history, lenders look at how long that history has been maintained, so the sooner a borrower establishes a positive credit history the better.

Building Credit with Help

Sometimes the easiest ways of building credit as a young person come with a helping hand. Here are three ways to build with the help of others:

  • Authorized users One of the simplest ways a young person can begin to build credit is by becoming an authorized user on someone’s credit card. This allows them the benefits of using a credit card and building credit history, without the obligation to pay for the charges. Just make sure the lender reports authorized user activity to the major credit bureaus, otherwise the process won’t help.
  • Cosigners – Sometimes, it’s possible to get a credit card or a car loan without credit history, as long as there’s a cosigner. This is someone with good credit – typically a family member – who’s willing to use their credit for the approval. Understand, however, that if the primary borrower doesn’t make their payments, the cosigner will be responsible for doing so.
  • Credit builder loans Credit builder loans are designed expressly for helping people do just as the name implies. Many credit unions, community banks, and online lenders offer these loans. When someone takes on one of these loans, the money stays in an account until it’s paid in full. Lenders report payments to the credit bureaus, and the borrower can only get the money after repayment is complete.

Building Credit on Your Own

There are some things that naturally build credit – like paying bills on time. Any full, on-time payment for things such as student loans or credit cards can lead to a positive credit history.

Here are two other ways to build credit, no help required:

  • Secured credit cards – A secured credit card is one in which the borrower uses a deposit to “secure” the card. This amount becomes the credit limit, otherwise the card works like a normal unsecured card. The difference is that the initial cash deposit acts as collateral.
  • Report rent – Using a rent reporting service is a good option for young people who are just starting out on their own. Some landlords automatically report, other times it’s possible to ask that on-time payments be reported. If the landlord won’t report rent, another option is to find rent-reporting services online, which help report on-time payments to the credit bureaus. Since these bills are already being paid, it makes sense to have them help with credit building.

Auto Loans Build Credit, Too

When the time comes, a young person can continue building their credit with an auto loan. Whether they’ve used the methods above and established credit or they need a cosigner to get the ball rolling, one thing’s for sure – they need to find the right lender. Here at CarsDirect, we can help with that.

We work with a network of special finance dealers across the country that have lenders specifically designated for helping people with little to no credit. Let us help you find one in your area. Simply fill out our no-obligation online auto loan request form to get started now!

Need a Car Loan?

It only takes a minute.

Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


Search New Cars by Loan Payment »

View estimated loan payments based on local rebates and financing offers.

Loan approval is not guaranteed and is subject to credit application and approval of the lender. Individual loan terms may vary. Use of this website constitutes acceptance of CarsDirect.com's Terms of Use, Disclaimer, Privacy Policy, and Cookie Policy.

Privacy Policy|Terms of Use|Cookie Policy|Disclaimer
COPYRIGHT 1999-2019 MH Sub I, LLC dba CarsDirect.com