The Benefits of Establishing Credit

The Benefits of Establishing Credit

Building your credit lays the foundation for your future financial success


Many young adults may not think that establishing credit is that big of a deal.  After all, you are just graduating from high school or are in your first year of a career or college.  We get it.

However, building your credit lays the foundation for your future financial success.  And, that success equates directly to a good credit score.

 Establishing credit can be done in several ways:

Hopefully, you are starting out fresh with no past history and a clean slate.  So, to get started establishing your personal credit profile, we recommend a few things:

    • Get a job that provides you steady income, even if it is part-time. And keep that job.
    • Open a bank account. Try to find one at a bank or credit union that does not charge big fees and requires no minimum balance or monthly service fee.
    • Pay your bills on time.  Your payment history is a key component of your credit score.
    • Get a credit card.  Most financial institutions will give you a low credit limit as you get started and as you pay it on time, month after month, they may increase your credit limit.  
    • Become an authorized user on a parent’s credit card,  if you are uncomfortable getting a starter credit card or do not have an income to pay your balance.
    • Don’t max out your credit card and if possible, pay off your balance each month.
    • Monitor your credit score.  Once a year, you can request a free copy of your credit report.  For your free credit report, go to:

Now, that you know the basics of getting started, let’s address why it is important to establish good credit.

Your credit history / credit score is used by lenders to gauge your creditworthiness.  Your credit history is your credit reputation and your credit score is your record of how well you repay your debts.   Credit scores range from 300 to 850 and the higher your score, the more likely you are to be approved and get a loan.  Most lenders have a minimum score requirement.  A general rule of thumb is that if your score is below 600, it might be difficult to get a loan approved.

This score will be looked at when you purchase your first car, when you purchase insurance for that vehicle, and it also impacts the interest rate you will pay for that loan.