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How to Start Building Credit at 18 | Credit Cards

Key Takeaways

  • Age 18 is a good starting point to begin building a positive credit history.
  • You can choose from among several credit products to produce good credit.
  • However you begin your independent financial journey, the key is practicing responsible credit habits.

Turning 18 technically means you’ve reached adulthood, and with that comes the opportunity to start your journey toward financial independence – even if Mom and Dad will still be helping out for a while. But learning how to build credit at 18 will make things easier when you are ready to really get out on your own.

“Your credit score affects your ability to get a loan, the interest rate you pay, your ability to get an apartment and sometimes even your ability to land a job,” says Brian Walsh, a certified financial planner and head of advice and planning at SoFi. Despite its importance, however, young adults often learn about credit by trial and error.

For example, a 2023 U.S. News survey found that young adults lack basic credit knowledge, including 18% of respondents who didn’t realize they had to make monthly payments. This credit confusion can lead to missteps and bigger financial consequences later on, however, especially considering how closely credit card management is tied to overall credit health.

On the flip side, starting off on strong financial footing can pay dividends. Since you’re able to open a credit card as early as 18, it’s one of the most popular strategies to help you start building a good credit score – if you learn to use it responsibly. Here’s what you need to know about how to start building credit at 18 or younger.

How to Start Building Credit at 18

Learning how to build credit at 18 when you’re starting from scratch might seem daunting, but slow and steady progress is more beneficial than waiting until after college. Although some strategies are tougher than others, you have several options:

  • Open a student credit card. One of the more popular options for establishing credit is opening a student credit card, which is unsecured. When you graduate, the issuer may convert your student card to a standard credit card. “Major card companies and banks specifically offer students a low-balance card,” says Stephen Henn, professor of economics and finance at Sacred Heart University. “However, despite the name, obtaining one may be a bit harder than would appear.” If you’re under 21, federal law says you can’t get a credit card unless you can show you’re able to repay your credit card balance – usually by a source of income or by adding a co-signer to the card. 
  • Get a secured card. Howard Dvorkin, certified public accountant and chairman of Debt.com, says this is the safest way for young people to build credit. To get a secured card, you pay a deposit upfront, which serves as your line of credit. Then, you make purchases and pay your monthly bill as you would with a regular card. “One big advantage is that secured cards are relatively easy to get. Another is that parents can be assured their children aren’t overspending,” says Dvorkin. “Otherwise, it’s like learning how to be a trapeze artist without a net.” Considering that half of college-aged credit card holders surveyed by U.S. News said they had credit card debt of $1,000 or more, having a safety net to start might be a good idea. Over time, a positive payment history will help build a good credit score, and eventually, you should be able to graduate to an unsecured card.
  • Take out a loan. Another option is to take out a loan and build positive credit as you pay it back. With limited or no credit history, you might find some loans just as difficult to qualify for as a credit card. However, you may find some car loans and personal loans easier to qualify for with limited credit history. You might also need to take out student loans for school. 
  • Try a credit-builder loan. As its name implies, a credit-builder loan is designed to help borrowers build their credit. A financial institution deposits the money you “borrow” into a savings account that you can’t access until you have repaid the loan. As you make regular monthly payments, you build credit. Once you’ve paid back the bank, you get the deposit and any interest it earned – plus the positive payment history.
  • Automate your payments. The worst thing for a young person’s credit is to be late on payments, says Henn, since payment history has the biggest impact on your credit, accounting for 35% of your score. “Automating bill payments protects your credit by ensuring a payment – whether a minimum or some other amount – is paid when due,” says Henn. “Credit reports do not come with an asterisk that says, ‘Sorry, I just forgot.'”

Check Your Credit Report and Monitor Credit Score

Once you get started on your credit journey, it’s important to keep tabs on both your finances and your credit health. Start with your FICO score, says Henn: “The FICO score is a very handy and well-understood metric of your overall creditworthiness.” While a FICO score does not provide detailed analysis of your credit behavior, he adds, any large changes in your FICO score – especially a large decrease – can indicate a problem and should be investigated.

Today, most credit card and bank accounts allow you to see your FICO score for free. Otherwise, there are opportunities to get your credit score for free through services like Capital One CreditWise (and you don’t have to be a Capital One customer to use it).

From there, download your free credit report from the three major credit bureaus (Experian, TransUnion, and Equifax) via AnnualCreditReport.com. “Everyone should take advantage of this,” says Henn. A credit report will show your payment history, outstanding credit lines, balances and other information. It can also help you spot potentially fraudulent activity, such as accounts in your name that you never opened. “For people building credit, getting a copy of your credit report is incredibly important,” Henn adds.

Why Start Building Credit Early?

Good credit might seem like something you don’t need to worry about until you’re out of college, in a career and about to get a mortgage or finance a car. The truth is that credit affects your life as soon as you become an adult.

“Some components of your credit score are based on how you are currently using credit, whereas others are based on how you used credit in the past,” Walsh says. “Assuming you use credit responsibly, building credit early can help your credit history.” He notes that your credit history is based on the average age of your accounts, so it can take some time to improve.

Your credit can come into play when you apply for a job, buy a cellphone or purchase auto insurance. If your credit history is limited or poor, you may be viewed as risky, which means you could be skipped over for job offers and pay more for cellphones and insurance. Plus, when you do want to borrow money for a home, a car or another reason, your credit will determine the interest rates you pay – or whether you’re approved at all.

In fact, your credit history (or how long you’ve been using credit) makes up 15% of your credit score. Lenders feel better about working with you when they see that you have a strong track record of managing credit. The longer your credit history, the better your score will be.

Another benefit to building credit early is that you’ll have more time to make up for any rookie mistakes. For instance, you might miss a payment here or there. The good news is that most negative items drop off your credit profile in seven years or less, and the impact diminishes over time.

Establishing Credit Responsibly Is Key

There’s no getting around it: Building good credit is crucial to accomplishing your financial goals. But it can also be risky, especially if you’re borrowing money without much experience handling debt. To make sure your credit-building efforts are successful, be sure to manage your credit wisely.

Most importantly, avoid taking on more debt than you can afford to pay back, especially high-interest debt. Instead, choose one budget item when starting out, such as a utility bill or cellphone bill, to charge to your credit card each month, and then pay it off right away. That way, you can ease into using credit cards and build credit without worrying about racking up a balance.

“A credit card requires self-control and discipline to make sure it helps you achieve your financial goals such as building credit rather than causing financial stress and hardship,” Henn says.

Sarah Goldberg
Sarah Goldberg

Sarah is a seasoned financial market expert with a decade of experience. She's known for her analytical skills, attention to detail, and ability to communicate complex financial concepts. She holds a Bachelor's degree in Finance, is a licensed financial advisor, and enjoys reading and traveling in her free time.

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