5 Ways Teens Can Start Building Credit Right Now

Here's how you can start establishing credit even before you're 18.

When it comes to building credit, most people start at a disadvantage. It takes credit to build credit, and with no substantial credit history, it’s difficult to qualify for the very credit cards or loans they need to start building credit. And if you’re under 18, you can’t even legally open a credit card in your own name.

Luckily, there are some credit building methods you can use while you’re still in high school — even before you turn 18. Here are a five ways high school students can start building good credit (plus some tips on how to maintain it). 

1. Get a Job 

OK, so getting a job doesn’t directly help you establish credit, but income is a key factor in qualifying for credit, and your job history, just like your credit history usually gets stronger with time. The more experience you have, the better your chances of getting a better, higher-paying job in the future, so get started early (without hurting your academics, of course).

The CARD Act of 2009 requires students and other young adults to demonstrate their ability to repay debt before they can open a credit card account. Having a job will help you do exactly that and strengthens your qualifications for getting a credit card when you’re old enough.

2. Get Added as an Authorized User 

When you’re under 18, one of your options is to get an adult to add you as an authorized user on one of their credit cards. As an authorized user, you can hold and/or use the adult’s credit card, but you won’t be the primary cardholder. The primary card user’s responsible card use can help boost your credit.

“As an authorized user [you] would be able to piggyback off of the more responsible person’s credit,” says Amber Berry, Certified Financial Education Instructor at Feel Good Finances. “Of course, this requires consent from the sponsoring adult because it is the card owner, not the authorized user who is ultimately responsible for making payments.”

This is only a good idea if you and the cardholder both trust each other to use or pay on the card responsibly. You’ll also want to make sure the card in question reports authorized users to the three major credit bureaus. (Still confused about what it means to be an authorized user? We’ve got a full explainer here.)   

3. Get a Secured Credit Card

If you’re already 18, another option for establishing a credit history from scratch is getting a secured credit card. Secured credit cards require a security deposit that dictates your line of credit — for instance, a security deposit of $300 would get you a $300 credit limit. Even though your card is tied to hard cash, you still use it for purchases and make monthly payments just like a normal credit card.

It’s much easier to qualify for a secured credit card, and responsible use will still help you build credit. Card providers may even raise your credit limit or offer you an unsecured credit card after a period of responsible use. You can find some of our picks for the best secured credit cards here 

4. Get a Student Credit Card 

If you’re heading to college soon, another good starter option is the student credit card. Student credit cards have more lenient qualification requirements, have low or nonexistent annual fees and often offer incentives for responsible behavior.  For instance, the Discover it Chrome student credit card offers cash back for good grades, 2% cash back at gas stations and restaurants on up to $1,000 in purchases per quarter and a cash back match at the end of the first year.  

5. Use Good Credit Card Habits  

When you do land a credit card, long-term responsible use is necessary to build and maintain your good credit. That includes paying your bills on time, carrying a low balance and paying your balance in full.

“Do your best not to carry a balance on the card. If you carry a balance and pay only the minimum monthly payment, it can take decades or more to pay off the debt,” says David Levy, Editor at Edvisors Network. “Late payments result in late fees, and some credit card issuers will increase your interest rate if you’re late with a payment. Making payments on time will help you build a good credit history.”

As you build your credit, it’s a good idea to monitor your credit reports and credit scores for errors and signs of fraud, which will also help you maintain your hard-earned credit standing. You can get your your two free credit scores, updated every 14 days, at Credit.com.

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Will I Lose My Credit History If I Change My Name?

Here's how to ensure your name change goes as smoothly as possible.

Thousands of people change their names each year, often as a result of marriage or divorce, and less frequently, just for fun. In fact, one man, armed with $50 and a written deed poll application, secured the moniker Bacon Double Cheeseburger in the United Kingdom last year.

Although Mr. Cheeseburger may be perfectly satisfied with his colorful designation, he and others can experience some bumps after a name change. And while you won’t “lose” your credit history if you change your name due to marriage, divorce or even just for fun, there can sometimes be confusion about your identity if your information isn’t being accurately reported.

In general, your new name is added to your credit reports after you notify your mortgage lender, credit card issuers and other businesses of the change. They report the change, be it a first or surname change, to the three main credit bureaus and your new name replaces the old, which then remains on your credit history similar to old addresses and employers.

How to Smooth Your Name Change Process

Keep in mind that changing your name isn’t an automatic process. It requires lots of paperwork and contacting the necessary businesses to ensure a successful shift. Personal participation is key.

The best way to ensure that your name change is reflected on your credit report is to contact government agencies and credit issuers who provide personal data and account information to the credit bureaus. These include:

  • The Social Security Administration: Applying for a new Social Security card is a good place to begin your name change because it can be used to help verify your identity as you move forward. While your Social Security number (SSN) won’t change, your name will be updated.
  • The Department of Motor Vehicles (DMV): If your name change is the result of marriage or divorce, you may need an original or certified decree before a change is allowed (rules vary by state). Visit the DMV to update your license.
  • Bank & Credit Accounts: Contact your lenders and credit card issuers to order new checks, debit and credit cards, and be sure any business accounts are updated as well.
  • Your Employer: In addition to updating their own records, your employer needs your new name in order to pay Social Security, unemployment and other taxes on your behalf.
  • Medical Providers: Medical bills rarely appear on your credit report unless you fail to pay it, but it’s a good idea to provide your doctors and dentists with your new name.
  • Insurance Companies: Insurance coverage is essential to protecting your home, car, business and other valuables. Make sure your providers have current information.

When you’re finished, it’s also a good idea to contact each of the three credit reporting agencies (Experian, TransUnion and Equifax) to alert them of your name change and ensure it is accurately reflected.

Credit reporting isn’t a perfect system, and while changing your name shouldn’t erase or negatively impact your credit history, it’s a good idea to check your reports and scores in the months that follow. Visit AnnualCreditReport.com to order free copies of your TransUnion, Experian and Equifax reports. You can also view two of your credit scores for free, updated every 14 days, on Credit.com.

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How Long Must I Have Credit Before I Get a Near-Perfect Credit Score?

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You pay your bills on time, you (barely) carry any debts, you keep the credit applications to a minimum (no churners here!) and you’ve got a nice mix of accounts going on your credit reports. Yet every time you check your credit, there’s one area that appears to be keeping you from that near-perfect record: Your credit history, per the little risk factors listed alongside your credit score, is just not long enough.

For someone just starting out in the world of credit, that may seem like a no-brainer. Credit history looks at the age of the information in your credit file (not your own age). So if you’ve only had your loans for a few years, why expect an A-plus performance? But for someone who has spent the better part of a decade as a dedicated credit goody two-shoes, it’s easy to wonder why you’re just not quite acing it.

The answer, as with many things credit-related, just depends.

What’s My Target?

Remember, there are lots of different credit scores out there, and while they all generally consider the same five factors when computing your credit — payment history, credit utilization, credit inquiries, mix of accounts and credit history — each may calculate those categories a bit differently.

Scoring systems “recognize how long a person has had a credit history and may calculate scores differently as a result,” Rod Griffin, director of education for the credit agency, Experian, said. “For example, the things that indicate risk for a person who has had a credit history for only five years are different than [they are for] a person that has used credit for 30 years. So, scores weigh the information in the credit report differently for each person.”

It’s important to note, too, that credit history considers not just the age of individual accounts but also the average age of your accounts, so if you have a few credit lines that are on the younger side, it could be affecting your overall performance.

Having said that, there are some parameters we can provide when talking about what constitutes a good credit history that lends itself to a good score. Per Barry Paperno, who blogs at SpeakingofCredit.com and worked at the major credit scoring model FICO for many years, an average credit age of 12 years and an oldest account of 30 years would put you among the FICO High Achievers (those with scores over 785).

According to Jeff Richardson, a spokesperson for VantageScore, another major credit scoring model, “based on some research we did a few years ago, those with Prime scores, on average, had a loan that is more than 15 years old.”

However, “some consumers have accounts that are substantially older than 30 years, and … the age of accounts is compared against consumers with similar age of accounts,” Richardson said. And, yes, those customers could theoretically be messing up the curve, depending on what model or algorithm is being used to compute your creditworthiness.

Maintain Your Good Habits

Of course, it’s important to not get too hung up on achieving a perfect score. First of all, believe it or not, you don’t really need one. Most credit-scoring models, including VantageScore and FICO, operate on a scale of 300 to 850, and anything over 750 will generally net you good terms on financing.

Moreover, you can hit that 750 mark without having credit for decades and decades. Credit history, after all, only accounts for 15% of most credit scores.

“That means 85% of the score is dependent on other factors,” Griffin said. “It is very possible for a person with a relatively short credit history to have credit scores as good as, or better than, a person who has used credit for 30 years or more.”

To build good credit in the long-term, just continue to make all your payments on time, keep your debt levels low, manage your inquiries and add a mix of credit accounts as your finances can handle them. And if credit history is bothering you and your score, “you may need to just be patient and allow that history to grow over time,” Griffin said. You can track your progress toward building good credit by viewing two of your credit scores, updated every 14 days, on Credit.com.

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4 Ways Your Credit Scores Can Empower You

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The members of the credit elite — consumers who reside at the top of the scoring ladder — are no strangers to the hard work having good credit requires. Maintaining good or excellent credit can help you qualify for the best financial offers. Here are four ways this can pay off and might leave you feeling financially empowered.

1. Credit Card Perks & Rewards

When you have good credit scores, you open up the doors to new credit opportunities. For example, you may now be eligible for some of the more premiere credit cards on the market that offer great rewards. (You can read more about reward credit cards here.) Before you apply for a new card, it’s a good idea to verify where your credit currently stands. You can see two of your credit scores for free, updated every 14 days, on Credit.com.

2. Negotiation Power

As an attractive borrower, you can expect to wield greater negotiation power in your financial dealings. For example, an Experian analysis found that “85% of the rental applicant population is in one of the three lowest VantageScore credit ranges (501 to 799), compared with a national average of only 64%.” You may be able to use your excellent credit score to distinguish yourself from the competition and negotiate better terms and conditions in several situations.

3. Lower Insurance Premiums

Insurance is the business of risk, and the premium you pay is based on several factors, including age, city of residence and past behavior. Based on the latter, it’s no surprise that many providers look at your credit to set insurance rates (California, Hawaii and Massachusetts have laws prohibiting this practice). Consumers with excellent credit may been seen as a lower risk and may be rewarded with lower auto, homeowner or health insurance rates.

4. Prime Interest Rates

Borrowing money can be easier with high credit scores. A stellar ranking may qualify you for some of the best available mortgage rates, auto loans and revolving APR. Depending on the value and length of the loan, excellent credit could help save you thousands of dollars over time.

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I Have No Credit History. What Does That Mean?

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In case you haven’t noticed, we get really excited about people checking their credit. We know that when people know what’s affecting their credit, then they will have a better idea of how to make their credit better. It’s not just us — a survey recently came out saying that regularly checking your credit can help you improve it.

But what if you finally decide to check your credit only to find out you don’t have any? It would be confusing, to say the least. One of our readers recently experienced this.

I try applying to a lot of websites to check my credit score and every one of them says I have no credit history. Can someone please explain to me what does this even mean?

A credit history is pretty self-explanatory: It’s a record of how you’ve used credit products, like loans and credit cards. So, if you you’ve never had a loan or a credit card, you’re not going to have a credit history.

Everyone starts out that way, and there are a few ways to take that first step into the credit world. You could apply for a credit card designed for people with no credit or take out a credit-builder loan. You may want to consider asking a trustworthy family member or friend to co-sign a loan or credit card application, or you could ask to be added as an authorized user on one of their existing credit cards. (There are a lot of risks with co-signing, for both people involved, because you’re tying your credit standing to someone else’s financial behavior. It’s important to weigh those risks if you consider going that route.)

For the First-Time Credit Builder

When you’re initially building credit, there are a few things you should know. First, when you’re picking a credit product, take the time to understand the details. For example, if you want to get a credit card, make sure you apply for a card that’s geared toward people with credit like yours (there’s no sense in applying for a “good credit” credit card when you have no credit history because you likely won’t be approved), and take a look at other requirements of the card. Lots of credit cards for people with no credit require cardholders pay an annual fee or a deposit. You may need a bank account in order to open up a credit card, and you’ll definitely need to have a way to pay the bill.

Credit card applicants younger than 21 must show proof of independent income to get a credit card, but consumers older than that can list household income on their applications, as long as they have access to it. Basically, because you have no history of using credit to show that you’ll use your new credit responsibly, the creditor will want to see that you have the means to pay them back if they give you a line of credit.

Once you get a credit card or a loan, be sure to make the payments on time, because payment history has the greatest impact on your credit score. If you’re using a credit card, you’ll want to use as little of your available credit as possible, because that’s really important to your credit score, too. (It’s called your credit utilization rate, and it’s generally recommended that you use less than 30%, ideally 10%, of your available credit if you want to have a good credit score.)

And, of course, when you get started using credit, you’ll want to see how you’re doing with it. You’re entitled to free annual credit reports from each of the major credit reporting agencies, and you can get two free credit scores with regular updates from Credit.com.

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Santa’s Credit Score Is Probably Better Than Yours

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Credit scoring company FICO had a little holiday fun and made a credit profile for jolly old Saint Nick. Based on the credit info FICO plugged into one of its algorithms, Santa has a 757 FICO score, well above the U.S. average of 695, per a news release. And he has what’s considered an excellent FICO score, with a range of 300 to 850.

If you’re looking to improve your score, there are some things you can learn from the fabled toy deliverer. Santa’s extensive credit history — which goes back eons — probably played a big role in his good credit score. Generally, the longer you’ve been using credit, the better.

Santa also has a great mix of accounts, given that he not only has installment loans and revolving credit products, but a variety of both. In fact, he has credit cards, a mortgage, an auto loan (for a hybrid sleigh, of course) and a home equity line of credit (HELOC). The age of your credit history accounts for 15% of your FICO score, while your account mix makes up 10%.

But the man isn’t perfect. There’s an old late payment in his credit history — things got tight in the recession — and since payment history makes up 35% of a FICO score, it could be dragging him down. The good news is, late payments are only reported for seven years and their impact lessens as they age, so Santa’s credit score isn’t hurting too much from that payment.

The bigger issue might be his credit card use, as he maxed out his $50,000-limit credit card to help with toy production for the holidays. FICO didn’t share how much of his total available credit Santa uses, but experts recommend using less than 30% of your available credit, and some say it’s best to use less than 10%. The idea is to keep credit card balances as low as possible, relative to the card’s limits, so maxing out cards is a bad idea.

Old Saint Nick would be smart to track his credit scores to see how changes — like lowering his credit card balances and continuing to make on-time payments — can affect them. You can check your credit by pulling your credit reports for free each year on AnnualCreditReport.com and viewing your two credit scores for free every 30 days on Credit.com.

More on Credit Reports & Credit Scores:

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I Improved My Credit Score. Can I Get a Better Credit Card Now?

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Have you worked hard to pay your bills on time and reduce your debt in order to improve your credit history? If so, it might be time to see if your hard work’s paid off by trying to get a better credit card. Here’s how you can leverage your improved credit score to get a credit card with better rates, rewards and benefits.

See What You Qualify For

When you applied for your current credit card, you gave the card issuer permission to look at your credit report, which determined your creditworthiness. But what you may not have realized is that the card issuer only considered your creditworthiness at the time of application. It may not re-evaluate your credit on its own in the months, or years, that follow. Now that your credit has improved, its up to you to ask for an improved credit card that better reflects your most recent credit history.

Thankfully, there are ways to get the credit you deserve when your credit score has improved. First, you will want to take a look at your scores by using Credit.com’s free credit report summary. Next, you should research the features you are looking for in your next credit card, preferably ones that your current card lacks. For example, you might look for a 0% APR promotional financing offer, a lower standard interest rate or additional rewards and benefits. You can then select and apply for a credit card that meets your needs, includes the features you are looking for and that is designed for your credit profile.

How to Improve the Card You Have

What if you simply want a card with a lower standard interest rate? Many cards now offer a range of standard interest rates, depending on your creditworthiness when you applied. So if you have a card that offers multiple interest rates instead of just one, then you may not have to apply for a new card to get the rate you deserve. Instead, contact your card issuer and ask to reevaluate your card’s standard interest rate, based on your current creditworthiness. You could also ask it to extend the credit limit on your current card, rather than apply for a new one.

To increase your chance of of receiving better terms, it will help to pay off as much of your outstanding balance as possible. Doing so will reduce the card issuer’s exposure to default while presenting yourself as a lower risk. In speaking with your card issuer, highlight your improved credit history and desire to maintain an ongoing relationship with the issuer. You can even say you’ll consider other card issuers if they can’t meet your needs. If you’re unsuccessful, you may have to apply for new account with a different card issuer.

By requesting better terms from your existing credit cards or applying for a new card, your improved credit score can help you enjoy better credit.

More on Credit Cards:

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