Making the transition from high school to college means you're in store for some significant changes in your life. Among those changes is the need to establish credit and build a solid credit score.

Your credit score is one of the most important things for you to nurture as an adult. It will affect almost every purchase you make on credit, your auto insurance rates, and your ability to rent an apartment. It may even impact your ability to get employment in desirable industries.

Unfortunately, it isn’t easy to build credit if you don’t already have a credit history. Lenders are reluctant to extend credit without it. So, how do you build credit if you don’t already have credit? As your credit union, we want to help our members do just that. Here are a few steps you can take to begin building a strong credit history and develop a great credit score.

1. Obtain a Secured Credit Card

Secured credit cards allow lenders to assume almost zero risks when extending credit. The premise is simple. You deposit an amount (for example, $500) into your credit account to establish a $500 credit limit. You use your card as you would a normal credit card and repay your balance.

If you are unable to make the payments, the financial institution uses the funds put aside in your account to pay the balance. This is why lenders assume little risk when extending these credit offers.

Every time you make your monthly payment on time, this will be reported to the credit bureaus, helping you build credit. Additionally, obtaining a secured credit card offers an excellent introduction to help you manage credit and discover the potential pitfalls credit card debt represents.

2. Take Out a Secured Loan

Secured loans work very much like secured credit cards. You deposit a specific amount into an account with a financial institution, such as the credit union, and they loan you the amount you deposited. You must then repay the principal of the loan, plus interest. Fortunately, the interest on these loans is typically low, and repaying the balance over time helps you establish a good credit history.

3. Secure a Credit Builder Loan

Credit builder loans are different from secured loans. While they sound the same on the outside, the way they work is quite different. These loans are specifically for people who have poor or no credit histories to build up their credit score.

With this loan, no money is required upfront. Instead, you pay the lender each month a predetermined amount. Your payments go into a savings account with your financial institution, and you will get this money back at the end of your loan.

It’s easier to think of a credit builder loan as a savings account you’re required to fund each month. Monthly payments are reported to the credit bureaus – helping to build your credit history and score. Lenders do charge interest rates on these loans, but they are typically minimal. Credit rebuilder loans will vary slightly with each lender, so it’s important to research all your options.

4. Become an Authorized Cardholder

To become an authorized cardholder on someone’s account, they simply need to add you. You will receive a credit card linked to their account and can make purchases. However, this option does present risks, both for you and the cardholder.

First, you should only ask to be an authorized cardholder on someone’s account that you trust, such as a parent. Second, you want the primary cardholder to have outstanding credit and be responsible with making their monthly payments. Their on-time payments will help boost your credit score.

If the primary cardholder does not make their monthly payments, this may hurt your score. You may be able to dispute the negative charges on your credit history with the credit bureaus since you are not the primary cardholder, but there are no guarantees, and this could be a lengthy process.

If your parents add you as an authorized cardholder and all agree to make on-time payments and manage the credit card responsibly, this could be a great way to boost your credit score. Plus, when you’re at college, you’ll have access to a credit card for emergencies.

We’re Here to Help!

There are many aspects of building credit that are difficult, even baffling, for people entering the world of credit for the first time.

Let us help you get the answers you need about secured credit cards, secured loans, and credit rebuilder loans so you can use them to build your credit stronger and faster.

As a not-for-profit financial institution, we’re here to help you make wise financial decisions. If you’re interested in learning more, we’re ready to help. Please stop by any of our convenient branch locations or call (949) 588-9400 to speak with a team member today


Each individual’s financial situation is unique and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.