One Way to Build Credit Without Risking Debt

Disclaimer: This advice may not be the best for every financial situation.

Figuring out a financial strategy as a recent graduate can be overwhelming. If you’ve been able to manage your payments and debts, you may want to start thinking about your credit. Building good credit should be an important part of any financial strategy and you want to start working on it as soon as possible.

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Photo courtesy of Sean MacEntee

As a city girl, I had no car payments when I graduated. I was also able to pay off my student loans within a couple of years, and never had a credit card while in college.

My strategy for credit building as a new grad? Replace my debit card with a credit card.

I don’t use a credit card because I need more money than I have access to, I’m using it purely as a way to build good credit (and get points for free travel).

Here are the steps you can take to follow the same system:

Pick a Credit Card

Besides building credit, the other goal of having a credit card is to get points for travel or bill credits. I chose an American Express and decided to choose one with the fee so I could get double the points on travel, hotels, and restaurants (my weak point is going out to eat). For me, the benefits of the card are worth the $75 annual fee.

Connect Your Credit Card to a Checking Account

You’ll want to connect your new credit card with the checking account you use with your debit card. Be sure that there will always be enough funds in the account so you’re not in danger of over-withdrawing. For example, maybe this is an account where you get a direct deposit from work.

Set Up Automatic Payment

This is the key part of the process. Paying the entirety of what you owe each month on time (thanks to auto pay) will do wonders for your credit. If you only pay the minimum balance, that’s when you have to start worrying about paying interest.

Stop Using Your Debit Card

Now that your credit card will be funded by the account your debit card is linked to, you’ll want to stop using your debit card. If you continue to use both you may run into issues of over withdrawing.

Call Customer Service

After I signed up for my first ever credit card I spent about an hour making sure I had read all the fine print. I read over all the paperwork and small print and also called a customer service rep to make sure I really understood deadlines and processes. The 24 hour live customer service number is now in my phone in case I ever have any issues.

What are you doing to build your credit? Share your thoughts in the comments.

About the Author

Emily is Founder and CEO of FindSpark. Passionate about the power of social media and networking; Emily has spoken at numerous colleges, conferences, and events including The International Youth Leaders Assembly at The United Nations, SXSW Interactive, Internet Week, Mediabistro's Social Media Bootcamp, Time Inc, Columbia University, and New York University, among others. Emily is also an adjunct professor, teaching social media and career courses at multiple colleges. Learn more about having Emily speak at your next event and follow her on twitter @EmilyMiethner.

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