There’s a catch-22 situation that nearly every young adult goes through. You need a good credit score to buy things like cars and houses, but you must have a credit history to build your credit score. So how do we do that without diving off the deep end of a financial crisis?

Tips for Responsibly Building Credit

Get a Subprime Car Loan

If you have bad credit (or no credit), one of the best ways to improve your credit score is to get a subprime car loan. Subprime loans are designed for people with bad credit and can help you rebuild your credit history. These loans will cost more over time because of higher interest rates but will help build your credit to secure a lower rate when you refinance or need another loan.

Use a Credit Card Responsibly

If you use a credit card responsibly, you can help improve your credit score. Always pay your bills on time and keep your balances low. It’s suggested that you keep your credit use at 10-30% per month and never max out your cards. If you ultimately pay off your monthly credit card balance every month, you will not have to pay the interest on the items you purchase. Additionally, you’re adding good payment history to your credit resume.

Get a Secured Credit Card

A secured credit card is another great way to rebuild your credit history. With a secured card, you put down a deposit that acts as collateral for the card. This deposit reserves the card and gives the lender confidence that you’ll make your payments. It’s the second best option when you’re past credit history or lack of history makes standard credit cards impossible to acquire.

Become an Authorized User

If you have a family member or friend with good credit and a reliable payment history, you can become an authorized user on their account. This will help you build a positive credit history. This doesn’t mean you will have access to their funds, but their payment consistency will reflect positively on your credit score.

Pay Your Bills on Time

One of the best ways to improve your credit score is to pay your bills on time. This includes your rent, utilities, and any other monthly payments. While loan payments carry much more weight than essential utilities, consistent payments can do more for your credit history and score than you realize.

Keep Your Balances Low

Another way to improve your credit score is to keep your balances low. This means that you shouldn’t max out your credit cards or have a high balance on your account. Further, as you pay things down, don’t forget that you shouldn’t have a zero balance either. Credit companies will view your total utilization, not just the payments.

Use a Credit Monitoring Service

A credit monitoring service can help you keep track of your credit score and report any changes to the credit bureau. This service can help you catch any errors on your report and ensure that your score is accurate. Free options help you keep an eye on your credit details and provide financial education opportunities to help you build a solid foundation. The paid options are far more in-depth and can be helpful if you’ve struggled with identity theft or false charges.

Check Your Credit Report Regularly

Finally, you should check your credit report regularly to make sure there are no errors. You’re entitled to one free credit report per year from each of the three major credit bureaus. Checking your information regularly can help you catch any mistakes and keep your score accurate.

Solid Foundations Lead to Financial Security

Following these tips can help you build a good credit history. Subprime loans, secured credit cards, and credit monitoring services can all help you improve your credit score. Paying your bills on time and keeping your balances low will also help you improve your credit score. Checking your credit report regularly is the best way to ensure there are no errors in the information.

Working to build a solid foundation anchored in financial education can help us bridge the gaps in economic and societal divisions. Bringing the poor out of poverty and the working class into the middle class creates a more accessible and rewarding life for all.