Things to Do to Establish a Credit Score

Attempting to get a mortgage loan with no prior credit history can result in a denial. Some creditors and lenders need to assess your credit history before giving you financing. Therefore, you may need to establish a credit score in early adulthood so you can obtain a mortgage or other type of loan.

First-Time Auto Loan

Larger, established auto dealerships rarely issue loans to people looking to establish credit, unless they have a co-signer or a joint applicant. However, privately owned dealerships may approve you for a first-time auto loan, and that will help you establish a credit score. Fresh-start or no-credit-check dealers and auto lenders make a point of helping people with bad credit and no credit establish or improve their credit score. You'll pay higher finance fees for these loans, but it can establish a credit score and help you get better rates in the future.

Credit Card

Applying for and obtaining a credit card is another way to establish a credit score. Getting a credit card with no credit history is challenging, and you should choose creditors that work specifically with first-time credit users. Many banks offer student promotions, and they approve college students for small credit limits. Putting down a security deposit may help you get a secured credit card with your bank or credit union. Another option, if you know someone with a credit card, is to become an authorized user on that person's account and build your credit score that way.

Student Loans

The ability to attend college when funds are low is a benefit of federal student loans. Another benefit is the ability to obtain a student loan without a prior credit history or credit check. Applying for a loan immediately after high school helps you establish a credit history, and making timely payments on your student loan debt each month gradually increases your credit score.

Credit Patterns

Establishing a credit score isn't enough to have good credit. You need to make wise credit decisions to build a high rating. Benefits of a high credit rating include the ability to obtain a home loan with a low interest rate, low-rate financing on auto loans and, in some cases, low rates on insurance. Making debt payments on time and keeping credit card debt to a minimum help build your credit score.