I'm Trying to Establish Credit

Establishing credit is one of the first tasks young adults face upon completing high school or undergraduate studies. A strong credit history will make obtaining loans for major purchases such as a car or a house easier. It also will enable you to qualify for an apartment without a cosigner and will reduce your insurance rates.

Open a Bank Account

Although your bank account information is not included in credit reports, credit agencies often require a bank account number on credit applications, according to Bankrate.com. A bank account will enable you to pay bills online or by check if you open a checking account. A bank account can help you manage your finances in an organized manner to prevent yourself from falling into debt, thus helping you build a solid credit history.

Get a Credit Card

Possessing a credit card is one of the fastest ways to build a credit history. However, it is also one of the fastest ways to fall into debt. To stay on top of your finances and keep your credit score high, start with a card that has a relatively low credit limit, such as $500. A card with a low credit limit will not allow you to charge more than the specified limit to the card, essentially making it impossible to fall into credit card debt higher than the card limit. Use your credit card to make small purchases, such as gas or groceries, and pay the bill on time every month. Bankrate.com recommends applying for a department store credit card. These cards have less strict requirements than major credit card companies so you are more likely to qualify for them.

Pay All of Your Bills on Time

Pay all of your bills, no matter how large or small, on time every month. Neglecting to pay your phone bill, electric bill or any other bill for more than a month can cause the company to collect on your account. This may be done internally or your information may be given to a third-party collection agency. If you neglect to pay after your debt has gone into collection status, your debt may be reported to the credit bureau, which will harm your credit. Paying on time will show that you are responsible with money, build your credit history and make companies more likely to provide a positive reference for you on credit applications in the future.

Take Out a Loan

Take out a small loan for an expense such as a used car or new furniture to help establish your credit history. Be aware that there are interest rates associated with loans and you will be required to pay back the loan in full in addition to paying the interest rates. Receiving a small loan from your bank and then paying the loan back in a timely manner will help you build positive credit.