Cap, Gown and Credit: Credit Basics for New Grads

If you're a recent college graduate, you've probably received a lot of advice about pursuing your passions or finding a job — but probably not about building and maintaining your credit.

College graduates in caps and gowns carrying diplomas

Credit 101

Credit is the concept of using tomorrow's money to pay for something you get today. By using credit, you agree to repay the money you borrowed and promise to do so in a timely manner.

Credit affects many aspects of your life, not just your ability to get a credit card. It can impact your ability to open a utility account, get a cell phone plan, rent an apartment and even the premiums your insurance company may charge you.

For some of life's bigger expenses, such as buying a car or a home, your credit will affect your financing options and the interest rates for your loans. In short, good credit is critical to your financial success.

Building your credit is the result of careful planning and money management. Your credit report and credit score, which are determined by your financial actions, are two ways that lenders evaluate your credit.

Your credit report is an official record of your credit history that includes money you've borrowed, your history of paying it back and how much open credit is available to you.

Your credit score is a single number that helps lenders decide how likely you are to repay your debts. Your score ranges from 300 to 850 points and is based on your payment history, the amount of debt you owe, how long you've been using credit, any new or recent credit and the types of credit you use. Generally, the higher your credit score the more options will be available to you.

Extra Credit: 4 Ways New Grads Can Build Credit

Now that you'll be out on your own, here are four tips to help keep your credit on the right track.

1. Build Your Credit History

Your credit history tracks your payment patterns over time. Your credit history begins when you open your first credit card or apply for your first loan. You can also help you build your credit history by making sure your rent payments are being included in your credit history.

Apply for a credit card. If you are applying for a credit card for the first time, you may consider a secured credit card, which requires you to deposit funds into a linked account. A secured credit card doesn't charge the same high fees as unsecured credit cards for those with no credit history.

After maintaining the secured card for about a year, consider looking for an unsecured card with good rates.

Report your rent payments. Your on-time rent payments can be used to build credit, but your landlord may not be reporting them to credit bureaus. Ask if your landlord is reporting your payments and if not, find out if they can.

Alternatively, you can report the rent payments yourself by paying rent through a rent reporting service. However, rental payment services usually charge a fee, so it's best to first ask if your landlord can report it for you.   

2. Use Credit Responsibly

Using credit responsibly, which is rooted in spending within your means, helps your credit. On the flip side, spending recklessly can hurt your credit. Try to:

  • Pay bills on time.
  • Keep your credit card balances low. Pay off your balances in full each month, or at least pay more than the minimum allowed.
  • Use as little of your credit limit as possible.

3. Chip Away at Debts

If you're a recent graduate, it's likely that you have some sort of student loan debt. You can build a positive credit history by making your student loan payments on time.

4. Know Your Credit Report

It is your responsibility to monitor your credit report and make sure all the information on it is accurate.

You should check your credit report at least once a year, and you're entitled to receive a free copy of your credit report every 12 months from each major credit bureau via

To learn more about credit, use our suite of financial capability and homeownership education resources, CreditSmart® — also available in Spanish. From managing debt to buying a home, you can learn it all at your pace, on your terms. Learn more about CreditSmart.

Freddie Mac CreditSmart

CreditSmart®: Financial Education on Your Terms

Education has power, and it’s in your hands with the CreditSmart® suite of financial and homeownership education resources. Whether you’re renting a home, are on the path to homeownership or saving for the future, CreditSmart — also available in Spanish — has something for you.

Learn more

Last reviewed: July 16, 2021

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