Credit is an essential part of adult life. Your credit score is used when buying a home, renting an apartment, buying a car, and even sometimes getting a job. Whether you are are a young adult taking your first steps into adulthood, or an adult who never started building their credit, we’ve got tips to build your credit.
 

First, Understand What Credit Is

Before you start experimenting with credit cards and loans, you really need to understand the basics of credit and lending. This can help prevent any big mistakes that could negatively impact your credit, just as you're starting out.

Credit scores are created by three different organizations called credit bureaus. Each one has a history of your credit interactions called a Credit Report. This report includes things like payments on loans, applying for a credit card, or missing a payment on a mortgage. Each item on your credit report impacts your credit score, good or bad.

There are different ways to examine a credit report and get a score, but the most common is a FICO® Credit Score. The basic FICO score ranges from 300 to 850, and the higher the score the better. 

To better understand credit scores, check out our handout that breaks them down.
 

Open a Low Interest, No Fee, Credit Card

One of the best ways to get started on building your credit is to open a credit card. They are relatively easy to get and come with no obligations. Simply opening a credit card will get you started on building your credit, even if you don’t use it for anything.

Be sure to open a credit card with a low interest rate and no annual fees. This can be a useful tool to build your credit without putting yourself in too much risk. Anytime you pay off your credit card on time, that information that you paid on time is sent to the credit bureaus. They mark that as a positive item, helping increase your score. Additionally, the longer you keep your credit card open, the better it is for your score.

When starting out, only use your credit card to pay for things you know you can afford. This could include small purchases, regular bills you have to pay, or the occasional treat. Just be sure you have the money to pay for it. If you fail to pay it off and miss the payment, it can hurt your credit. Be smart and conservative with your credit card.

Pioneer offers a great, low interest credit card for our members. Along with helping your credit score, you can also earn Rewards! points on every purchase that you can redeem for travel, gift cards or experiences. Apply for a card today!
 

Get an Auto Loan

Another common first credit purchase is to buy a car. Many young adults need a car in order to get to college or a job. Whether you’re buying a beat up old car or something new, this can be a great opportunity to start building credit.

A major barrier to getting that auto loan is not having any credit, but there are some ways around it. One way is to have your parents or somebody you trust co-sign on the auto loan. The lender uses their credit score to back up the loan. Then, when you make payments on the loan, that info is sent to the credit bureaus, boosting your score. Just be sure to make your payments on time and in full, cause messing up can impact your co-signers credit too.

Another way to get that auto loan is to apply for a Pioneer First Time Auto Buyer Loan. We work with members who have never purchased a car before to get them into the right car. That includes no down payment required, 100% financing on the car, and $500 on a share secured VISA credit card to help build your credit further. Apply for a First Time Auto Buyer Loan today and start building your credit.
 

Become An Authorized User on a Credit Card
 

Another fun tip for growing credit, especially for young adults, is to become an authorized user on somebody else’s credit card. This means you can utilize their credit card, but the primary is the one in charge of making payments. 

Before becoming an authorized user, you need to check with the credit card company to see how they report authorized users to the credit bureaus. If they don’t report authorized users, it’s not worth it, but if they do, this can be a great method to start building credit. This can establish credit history while giving parents a safe way to teach young adult children how to use credit responsibly. 
 

Open a Credit Builder Loan

If you want to build credit but having a credit card or auto loan doesn’t appeal to you, a credit builder loan could be the method you want to use. It’s a low risk way to both save some money and build your credit.

How it works is, Pioneer loans you some money, but keeps it secured in an account. You make monthly payments on that loan and those payments get reported to the credit bureaus. That positive information helps grow your credit score month after month. Then, when you’ve paid off the loan, you get the money you’ve been paying and have a better credit score. Pioneer's Credit Builder Loan is great for people with poor or no credit to get some activity on their credit reports.

Learn more about Credit Builder Loans