My niece recently graduated from college Magna Cum Laude and is working at her first job. She would like to rent an apartment in New York City and asked my advice.
My first piece of advice to her was to build up her credit. For those just starting out, a good credit history will help them rent apartments and get car loans and mortgages in the future.
- Paying bills on time is the key. Paying off student loans is a good place to start. Making student loan payments on time is an effective way for young adults to boost their credit scores.
- In general, retail credit cards, such as those issued by stores like Macy’s or gas stations, are easier to obtain than regular unsecured cards. The downside is that they don’t carry as much weight on a credit report as a normal credit card. Also, make sure to read the fine print: some retail cards carry very high interest rates. So you need to be extra diligent about paying your balance in full on time every month.
It is difficult for young adults to get unsecured credit cards on their own since legislation enacted in 2009 requires that a credit card applicant under the age of 21 have a source of income or an adult co-signer. This is where parents can help their children get a head start in establishing a good credit history for which they will thank you in the future. If you have good credit yourself and a responsible child, you might consider adding him or her as an authorized user to one of your credit cards. Limiting the credit line on the credit card account can potentially prevent overspending.
Many credit card companies provide free credit scores. However, if you don’t have a credit card you can obtain a credit report through a credit bureau such as Experian or Equifax.
Once a young adult starts using credit, it’s essential to manage it properly. So my advice to my niece is this:
- use credit cards regularly, but judiciously, to make purchases; don’t go over your credit limit and pay bills in full every month and always pay on time; monitor your accounts carefully to make sure all charges are accurate and authorized.
Building a good credit score takes time, but if you follow the guidelines above, all that’s left to do is be patient, and you can slowly work your way up to an excellent credit score and keep building that purchasing power! Call us if you have any questions about renting or buying 914-761-7878.