Building Credit as a Young Professional

Danny Larrabee, CFP® |

Establishing a strong credit history early in your career is important for a number of reasons. A good credit report will typically lead to more favorable terms on bank loans and credit cards. But that’s not all. Prospective landlords and, increasingly, employers consider an applicant’s credit history before entering into leases or extending job offers. Even the utility company is likely to pull your credit report before taking you on as a new customer. There are three principal credit reporting agencies: TransUnion, Equifax, and Experian. Each of these agencies are keeping tabs on you and issue regular reports on your creditworthiness. For those just starting out, the process of establishing good credit can be intimidating, even overwhelming. However, there are several simple steps young professionals can take to build a strong credit history.

Starting Out:

Credit scores are based on many factors, the most important being payment history, credit history longevity, types of credit being used, and the total amount owed through various credit lines. When considering the important elements of a credit score, you may wonder how to get started in building a strong credit history. For those who are still in school, applying for a student credit card is a good place to start. These introductory cards generally come with a low credit limit and have a higher interest rate but they give students the ability to establish a credit history. If a student credit card is not available or for those just starting out in their careers, the other option is to apply for a secured credit card. These cards require you to put a deposit down, which effectively serves as insurance for the lender. Secured cardholders who pay their bills on time will eventually be able to qualify for a conventional (unsecured) credit card.

Building Credit:

Once you have established a line of credit, it is important to build and demonstrate good habits over time. Make it a practice to pay your bills in full and on time every month. Doing so will help to establish yourself as creditworthy, and you’ll see your credit score rise, your credit line increase, and lower interest rates down the road.

Credit utilization is another important factor when it comes to building credit. Credit utilization is calculated as your credit balance as a percentage of your credit limit. Keeping a relatively low utilization ratio (generally less than 30%) shows lenders that you aren’t overextending yourself. As you’re trying to establish yourself, also keep in mind that more credit is not necessarily a good thing. Apply for too many credit cards and it will raise a red flag to prospective lenders and negatively impact your credit score.

Mistakes to Avoid:

Starting out, credit can be something that you use responsibly and to your advantage over the course of your life. It can help to finance a new house or a child’s education. However, mishandled, credit can also be a handicap for years. It is important to avoid some of the most common credit card-related pitfalls early in your career to ensure you get off to a good start: 

  • Applying for too many credit cards in a short period of time – This is a surefire way to lower your credit score and you may find your credit applications getting repeatedly denied. Better to just throw those credit card offers you get in the mail right in the trash. Another option is to opt-out of these offers by visiting  This website allows you to opt-out of preapproved/prescreened offers for 5 years or permanently.  You are also able to opt-in if you ever change your mind.
  • Not paying your bills on time and in full – This tells lenders that you’re spending more than you can afford. And with credit card interest rates often exceeding 20% annually on unpaid balances, you’ll have a hard time catching up on those bills. Instead, stay ahead of the game and pay off your card balance each month.
  • Maxing out your card – You may be tempted to splurge now and then and take advantage of your card’s credit limit but unless you intend to pay it off in full immediately, it will cost you in the form of interest charges and more than likely, a lower credit score. You’ll be better off sticking to a budget.
  • Not monitoring your credit report – It is important to check your report periodically for any unknown inquiries that may be related to fraudulent activity. There are also options available online to setup a credit monitoring service to perform these checks for you. You are entitled to one free credit report every 12 months.  To check your credit for free, visit


In summary, it is important to start building your credit history and habits early in your career. Establishing a strong credit rating and learning to use credit judiciously while you’re young will give you greater financial flexibility and freedom in the future.  Credit cards are a good place to start when it comes to demonstrating to lenders and future employers that you’re worth the risk.




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