Establishing credit is one of the first steps on your financial journey. Having credit allows you to secure a loan, get a credit card, rent property and more. This is why knowing how to establish credit is key to meeting your financial goals.

Young adults or students, especially those between the ages of 18 and 21, often have no established credit. If you build your credit responsibly and do your research ahead of time, you can put yourself on the fast track to financial freedom.

We will detail seven ways you can establish credit, tips for building and improving your credit score, and how to understand your credit report in this article.

Read on for a full review of how to establish credit.

6 Ways You Can Establish Credit

You want to establish credit but were rejected for a credit card or loan when you applied for one. This is more common than you might think, as most people with no established credit are denied credit cards or loans.

It is necessary to start accruing transactions on a credit report before you can establish a credit score, such as a VantageScore. It can be challenging to establish credit, as most lenders will not approve you for a credit card or loan unless you already have a credit history. There are other ways to establish credit, and many of them are low risk for both you and your lender. The following are seven options available to first-time credit users, along with the pros and cons for each.

1. Become an Authorized User on Someone Else’s Credit Card

A quick and easy way to start establishing credit is to become an authorized user of someone else's credit card.

Once an authorized user is added to the account, you can begin using a credit card linked to the account after that step is completed.

Even one late payment can damage your newly established credit score if your account holder doesn't keep up with their payments.

2. Get a Cosigner or Co-applicant

Cosigners are also available for credit cards and loans. Because they are responsible for any unpaid debt, this option only works if you have someone willing to shoulder the responsibilities that come with cosigning.

Having your parents cosign a small loan for you is a common option. If you're still in college, you could even use this loan for school expenses!

As well as being riskier for the cosigner, this option also makes it much more difficult to remove a cosigner from an account, compared to removing an authorized user.

3. Get a Secured Card

You can use a secured card to avoid spending money you don't have while showing creditors that you pay your monthly bills on time.

The secured card allows you to put your own money down as collateral before you begin spending. The deposit you put down becomes your spending limit.

Most debit and credit cards have two CVVs. The first is encoded in the magnetic strip and must be entered when making an online purchase. The second is visible on the card. Click cvvme for more information.

You don't run the risk of going into debt or spending money you don't have because you can only spend up to the amount you've put down. There are usually low limits on secured cards, such as $500, so they can't be used for huge purchases, but they are a good way to learn how to manage your credit bill.

4. Apply for a Student Credit Card

A student credit card is a great way for college students to start building credit. They're designed for students, so you have a better chance of getting approved even if you don't have a previous credit record. The only caveat is that you have to prove you are a student at a college or university that is verified.

Most student credit cards have lower balances to keep students from building crippling debt, and some cards even reward students for good grades.

It is not uncommon for student cards to offer an introductory 0% Annual Percentage Rate (APR). An APR is the interest rate you will pay on your credit card balance each month if you choose to carry it over. If you're considering getting a student credit card with 0% interest, make sure you read about what the rate will be once the offer period ends, as student cards usually carry a high-interest rate.

5. Take Advantage of Rent Reporting Services

It is possible to add rent payments to your credit report if you are already paying rent when you are trying to establish credit. Rent payments are accepted by all three major credit bureaus - Experian, Equifax, and TransUnion.

Rent reporters usually charge a fee for their services, but if you're looking for a low-risk way to establish credit on payments you've already made, it's worth it.

6. Apply for a Secured Loan

With a secured loan, you can take out a loan without a credit history by providing collateral, much like a secured credit card. In the event you fail to repay the loan, your creditor can seize the asset you own, not just your cash.

Secured loans are usually available from banks, credit unions, and online lenders. Secured loans are good ways to establish your credit and raise a large amount of money. You can secure a secured loan by using your car or savings account as collateral. As with most loans, this secured loan will likely have an APR attached to it, so expect to pay interest.