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April 8, 2026
by Carissa Fallon
Establishing and building credit is an essential component of financial health, influencing everything from financial milestones to long-term goals. This article will provide insight into how you can build credit, establish a monthly budget, manage your debt responsibly, and understand what elements are used to determine your credit score.
As a young adult, I established and then built my credit by getting my own credit card as I was heading to college. However, each person’s path is different. Some of you may build your credit by obtaining an auto loan or applying for a student loan. Another way to build credit is by being added as an authorized user on a family member’s credit card. Just make sure that they are in good standing; being an authorized user on the credit card of someone with poor credit can actually negatively impact your credit score.
A credit card is an example of “revolving credit”. This means that you are able to utilize funds up to a certain limit, repay them in accordance with their terms/conditions, and then use them again without the need to reapply, with the understanding that your account remains in good standing. For example, if your credit card limit is $1,000, you can’t spend more than $1,000 in a month (or statement period) on your credit card. Once you pay down or pay off your balance, you can spend again the following month. However, your payment amount may vary depending on the statement ending balance and other factors such as interest.
Student and auto loans are examples of “installment loans”. An installment loan allows you to borrow a lump sum of money and pay it back over a period of time through “fixed” monthly payments. For example, most student loans are paid back over the course of 10 to 20 years, whereas an auto loan can range from 24 to 84 months. Both instances have a fixed principal and interest payment for the duration of the loans. A fixed monthly payment can help to budget for that payment.
Once you determine which credit building method is best for you, it is important to create a monthly budget, so you are aware of your income and expenses and can avoid spending outside of your means.
Creating a budget is pivotal for your financial success. It is important to know how much money you are bringing in and where it goes once you get it. You can create a budget using Google Sheets, Microsoft Excel, or even using a pen/paper. Whichever way it is easiest for you to create a budget, you’ll need to know your expected monthly income and then all of your typical expenses.
A budget will help you understand how your money is spent and gives you the opportunity to adjust, such as cutting spending or using money to invest. Managing your money effectively is important because it will help you reach future financial milestones.
Once you have obtained a credit card, student loan, installment loan, or other debt, you should familiarize yourself with the payment schedule so you can ensure timely payments. Setting up automatic payments is extremely helpful and can help to prevent fraud. You just need to make sure you keep enough money in your account at the time that the payments are due each month. Additionally, it is good to get into the habit of checking your monthly statements to ensure that each transaction on your account is authorized and no fraud has taken place.
A great way to start using your credit card would be putting a monthly subscription such as Netflix, Spotify, or other reoccurring payment onto a credit card and then connecting your checking account to the card to pay in full each month. This single monthly payment will start building your credit, even though it is a smaller amount. Once you get more comfortable with your budget, you can consider using your credit card more often. Be sure to only spend what you can afford to pay back, so you can stay on top of your payments and continue to build good credit.
Similarly for an installment loan, ensuring that the payment is made on time each month will help build your credit over the duration of the loan.
After you have established and built your credit, you should understand what elements are used to determine your credit score as part of your overall credit report and how it can impact your financial health over time. Mistakes can happen, so it’s important to monitor and subsequently understand your credit report and what is included so you can dispute such inaccuracies.
Building a good credit score is a process that takes time, which is why it’s important to start early! For those of you headed to college, talk to your parents or guardian about becoming an authorized user on their credit card to pay for stuff like school supplies and groceries. The sooner you start building up credit, the more likely you’ll have a solid credit score when the time comes to apply for credit on your own.
And remember, you can always talk with a lender at New Tripoli Bank. Stop in or give us a call - we are happy to help!
Carissa Fallon is a Loan Administration Specialist for New Tripoli Bank. She graduated with honors from Penn State University with a Bachelor of Science in Finance. When she's not working, she enjoys playing tennis, spending time with her family, and keeping an active lifestyle.
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