Which comes first, the chicken or the egg?  You can’t borrow money because you have no credit.  You can’t build credit because you can’t get a loan.  Catch 22.

Every young person needs to establish their credit these days.  That fact is undeniable.

Credit is simply a rating that tells potential vendors whether or not they should loan money to you.  It is a protection for the lender.  Credit is basically assessing your ability to repay money and the likelihood that you will indeed pay back the money borrowed.

Start with a budget    The first step in building and managing credit is to make a budget.  Look at what money comes in monthly.  Determine how much is needed for your essential needs like rent, lights and food.  (Note that nonessential needs include expensive cars, clothes, and premium cable packages.)  Be sure to set money aside for saving, as well.

Then, determine a small amount that you can afford to pay monthly on a credit card. Maybe a payment of $5000 or less.   Don’t go above that.  Make sure that you can afford to pay this even on rainy days.  Credit is built by (1) paying monthly minimums, (2) paying on time, and (3) never missing payments.  Credit is hurt by not paying on time and by borrowing too much money.

Choose how to build your credit   The easiest way to build credit is to get and use a credit card.  Even if you can afford to pay the entire bill off, elect not to.  That won’t build credit.  Credit is built over time.  Steady Eddie making payments.  Resist having a high credit limit.  $10,000 is plenty.  Bear in mind that other bills like your electric, gas, or rent also go towards your credit score.

Stay disciplined   Many more young people have poor credit than have good credit.  And having bad credit hurts badly.  You may not be able to rent an apartment, buy a house or buy a car.  Your credit score is important.  Credit scores take years to build but can be destroyed in no time.   Be diligent with your credit.