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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Hate Credit Cards? There’s Still a Way to Build Credit & Avoid Debt

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If you want to build credit, don’t want to go into debt and don’t want to use a credit card, you’ve got a bit of a problem. You can definitely build credit without going into debt, but that generally requires using a credit card. There are plenty of ways to build credit without using a credit card, but they generally require going into debt. It’s frustrating, we know.

Things like utility payments and rent are sometimes reported to the credit bureaus and are factored into a few credit scoring models, but it’s far from the industry standard right now. There’s some good news, though: There’s a debt-free, low-maintenance, credit-building strategy you might not despise.

Step 1: Check Your Budget for a Recurring Bill

Most people have at least one consistent monthly expense. These are often subscriptions (like Netflix or a magazine) or small bills (like an insurance premium or a cell phone bill). Many of these can be set to automatic payments, and many of them can be paid with a credit card without an additional credit card processing fee. See if you can find one. Got it? OK, you’re not going to love this next step, but give it a chance before you freak out.

Step 2: Get a Credit Card (Wait, What?)

Yes, this strategy requires a credit card, but you hardly ever have to use it. You may never take it out of your wallet (and, really, you could probably just keep it locked up at home). If you don’t have a credit card, you’ll first want to check your credit score, which you can do for free on Credit.com, to see what you might be able to qualify for. There are credit cards for people with bad credit and no credit, but keep in mind that some credit cards carry annual fees or require a deposit in order to access a line of credit. Still, you can get a credit card for a relatively low cost (or for free), and if you pay off the balance on time every month, your purchases won’t accrue interest. (See? No debt.)

Step 3: Pay Your Small, Recurring Bill With Your Credit Card

Set up your automatic payment to hit your credit card.

Step 4: Pay Your Credit Card Bill

You can either manually pay your credit card bill as soon as the other bill payment hits, or you may want to set up another automatic payment, this time for your credit card. Make sure you’re paying it on time and in full each month, because that’s what’s going to build a positive credit history and keep you from going into debt.

Step 5: Check Your Progress

It’s easy to “set it and forget it,” and that’s sort of the idea here, but you don’t want to forget it and accidentally miss a payment because you haven’t updated your account or a payment didn’t go through as it was supposed to.

Some Extra Tips

When you’re deciding if this strategy is right for you (and it’s not for everyone), remember that part of what builds a good credit score is using as little of your available credit card limit as possible. So, if you have a very low credit limit on your credit card, the bill you choose to pay with it should be fairly inexpensive, if you want to get the most out of this strategy. Making sure this goes right requires attention to detail — it can backfire if you miss a credit card payment, max out the credit card or miss the bill payment and it ends up in collections — and it’s also a good idea to check your credit score regularly to make sure it’s having the effect you want it to.

Find the perfect credit card for you using our credit card finder tool.

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Do You Start With a Credit Score of ‘0’?

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When you think about it, credit scores have a lot in common with the SATs: They stress people out, involve tough-to-answer questions and play a huge role in determining whether your applications (albeit for financing) get denied.

There’s another notable similarity, too, which you may not know about: When it comes to credit scores, you can’t get a zero.

The Lowest Possible Credit Score

Most major credit scoring models, including standard FICO and Vantage Scores, have a range of 300 to 850, with 300 representing the lowest, or worst, possible score and 850 representing the highest, or absolute best. (You can learn more about what constitutes a good credit score here.)

Some specialty scores, including the FICO Industry Option scores, have a lower minimum (250), but, generally, no matter what model we’re talking about, “you don’t start at zero and, let’s say, work your way up to a respectable score over time,” Barry Paperno, a credit scoring expert who worked at FICO for many years and now writes for SpeakingofCredit.com, said in an email.

You also don’t really start at a 350. That’s because until you meet a model’s minimum criteria, you won’t have any score at all. In that case, the credit bureaus will let a lender (or landlord or cable company or anyone else requesting your credit as part of their application process) know that you’re score-less.

“When a score can’t be computed because the credit report doesn’t meet the minimum scoring criteria, an alpha or numeric ‘exclusion code’ is transmitted to the requester indicating one, that no score can be calculated, and two, a general reason why the credit report didn’t meet the minimum scoring requirements,” Paperno said.

No Panic Necessary

Thin-to-no credit can certainly make it harder to secure a loan, but there are lines of credit specifically designed to help people in that demographic (see secured credit cards, student credit cards or credit-builder loans) establish a credit history. And, after you get ahold of some starter credit, it shouldn’t be too long before a model is able to calculate your score. For instance, the minimum criteria for the FICO scoring models, Paperno said, generally includes:

  • At least one account opened more than six months ago
  • At least one account reported to the credit bureau within the past six months
  • No indicator on the credit report that the consumer is deceased

Moreover, once you meet this criteria, you could conceivably find you have a decent score — so long, of course, as you’re using your credit account(s) responsibly.

“For instance, you can be 18-years-old with a secured card opened six months ago, pay on time every month, keep a low utilization, and your first score can be in the high 600s,” Paperno said.

Remember, to build good credit in the long-term, you want to make all loan payments on time, keep the amount of debt you owe below at least 30%, and ideally 10%, of your total available credit limit(s), and add a mix of accounts to your credit file as your score and your wallet can handle it. You can track your progress toward building good credit by viewing two of your credit scores for free each month on Credit.com.

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Should I Be Worried If My Credit Score Dropped 10 Points?

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You’ve decided to check your credit every month. And, since you’ve been working hard to establish a good credit score, you’re a bit disheartened when you learn that your number appears to have dropped over the last 30 days.

Should you also be worried? Not necessarily.

Why the Drop? 

Credit scores are dynamic — they change as the information on your credit report gets added and/or updated. Most lenders report to the major credit reporting agencies in 30 day increments, so it’s fairly common to see slightly different numbers from month to month.

A major culprit behind small dips are credit card balances. Credit utilization — how much debt you’re carrying vs. your total available credit limit(s) — is a major factor among credit scores, so if you charged a bit more to your plastic this month than the last, there’s a chance your score is being affected by those extra purchases.

There are other reasons why you might see a small decrease: Perhaps you applied for a new line of credit last month (that’ll create an inquiry, and ding your score). Or maybe you’re looking at a different credit score. Remember, you have more than one. They can vary by lender or loan product and, though all scores are generally based on the same building blocks, each specific algorithm may be crunching numbers a bit differently.

Stay Alert

None of this means you should simply discount any changes you may see. A dramatic drop in score, for instance, could be a sign that identity theft is occurring. Or there could be an error on one of your credit reports that is affecting your score. (You can go here to learn how to dispute errors with the credit bureaus.)

If you do see a decrease, some digging might be required to see what is behind it. You can start by pulling your credit reports for free each year at AnnualCreditReport.com — a good idea if you’re seeing really big discrepancies in your scores. You can also view your free credit report summary, updated each month, on Credit.com. It tells you how you’re doing in the five key drivers of your credit scores — payment history, debt usage, credit age, account mix and inquiries — and can help you pinpoint what may have gone wrong or what you can do to ultimately improve your score.

Remember, you can build good credit in the long-term by making all loan payments on time, keeping debt levels low, limiting new credit inquiries and only adding a mix of credit accounts as your wallet and score can afford them.

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