By M Katie Helle, CPA

When most people think of building credit, they think the only way to do it is to get credit cards.  This certainly isn’t the case.  There are a lot of different ways to building your credit without racking up your debt.

  1. Pay student loans timely. If you are planning to attend college, most individuals need some assistance with paying for the cost of tuition.  Student loans are reported to credit bureaus so paying them timely is reflected on your credit accordingly.
  2. Get an auto loan. Many individuals need assistance with large purchases like a vehicle, even if it’s only for a few thousand dollars.  Making your payments on time will help to show you are credit worthy.
  3. Get a secured credit card. Secured credit cards are a great option for someone starting out.  You basically give the financial institution a down payment to secure a line of credit.  They will hold this money until the secured card is closed or turned into a revolving line of credit.  Just because they have a deposit for the credit card does not mean you do not have to pay your bill.  The down payment just shows the creditor you are serious about obtaining credit.
  4. If you are renting, you can ask your landlord or utility company to report your payment history with the credit bureaus as this can also increase your credit score.

No matter what avenue you take to build your credit, it is important to understand racking up debt will not increase your credit score as effectively as taking small steps as mentioned above.