How To Start Building Credit At 18: [PLAN OF ACTION]

Shawn Manaher
Shawn Manaher
Updated on November 16, 2022
how to start building credit at

It’s never too young to start building credit. Here are some tips and a plan of action to begin building credit at 18.

The sooner you start building credit, the better. If you are 18 years old and want to start building your credit, there are some simple steps you can take to begin making a credit score that will bring you success in the future.

Start by becoming an authorized user on a credit card. You can also get your first job and get your own credit card. Making on time monthly payments also helps.

Once you have a good credit score, you are able to have easier access to loans and be able to get better interest rates and payback terms. This guide will cover exactly how to build credit at the age of 18 to give you success in the future.

Why Is Building Credit Important?

Building credit is important no matter what age you start, but the earlier the better. When you have a good credit score, you have more financial opportunities because it’s easier to get loans and credit cards with better rates.

As you get older, you will also want to get a home and a car. This involves getting auto loans and mortgages. If you have already established credit and have a good score, you will find it much simpler to secure larger loans that you might need for homes and cars.

Some employers even check credit to see how responsible you are. So, having no or bad credit can potentially make you lose out on an important job that you want.

If you’re a kid and want to start building credit, make sure to ask your parents or guardian for help. If you’re a parent of a child who is soon to be 18, you can start helping your kid establish credit as well as good habits for making monthly payments and budgeting.

Is 18 Too Early To Start Building Credit?

No, 18 is not too early to begin building credit. You might not have access to all credit cards and loans, but there are some companies that are willing to give credit cards to young people that do not have credit yet.

The earlier you begin to build credit, the easier securing loans and credit cards will be as you get older. The age of your credit history, when it’s long, also helps you get loans easier in the future. If you have a credit history of several years rather than just one or two, you get loans with lower interest rates.

Ways To Build Credit

Now that you know the importance of building credit, you can begin to make a plan of action to help point you in the right direction. Here are the top ways to make sure you are building credit.

Get Your First Job

Having a job allows you to become financially stable. If you are still living at home, you might think you don’t need a job. However, having a job is important when it comes to establishing independence. It will also give you your own money to help you make purchases for yourself.

Having a job on its own does not build your credit, but it’s a good way to convince someone that you have an income that can make payments on loans and credit cards. It also shows that you work hard and that you are responsible.

Credit Card issuers want to see that you have an income that can allow you to pay back the money that you have borrowed.

Become An Authorized Users On A Credit Card

You will need a parent or adult willing to help you with this one. You can also become an authorized user on a credit card before the age of 18 if the adult agrees. To be an authorized user, you will be added to the account, and you can pay the credit card bill. However, you are not required to pay the credit card bill.

The account will still belong to the adult and not to you. They should be able to add you as a user online, or they might need to call the credit company and add you over the phone. Make sure the adult is paying the bill on time and that they are in good financial standing. Whatever they do on the account will affect your credit score, so you want to make sure you trust the adult, and you know they are paying their payments each month.

You can also pay your portion of the charges you make on the card. This means you will need to send the account holder money each month for your charges, and then they will pay the balance when it’s due.

Get Your Own Credit Card

As a young person, you won’t be able to have unlimited options when it comes to credit cards like older people with established credit do. However, there are some card companies that offer student credit cards. They often have low credit lines, but they allow you to get into the practice of tracking your credit score and making on time monthly payments.

You can also get a secured credit card. This means you will need to fund the credit card. So, you might need to deposit $300, and then you will be able to charge up to $300 to your account. This allows you to practice budgeting. It also ensures you are not using the credit card for free money like some people do. 

Credit cards need to be used wisely, and you should never charge money to it that you do not have to pay back.

Make On Time Payments

Once you have a credit card, you need to make sure you are monitoring when your payments are due so that you do not miss one. Missing payments are reported to credit bureaus, so you will see a drop in your credit score each time you miss a payment.

You can write down when your monthly payments are due either on your phone or a paper calendar. Most credit card companies will also send you notices either through email or to your address, so you know about a week ahead of time when the payment is due and how much.

On time payments also determine your credit score because payment history is 35% of your credit score. You will see a sharp drop in your credit score when you are not making on time monthly payments. 

Finding your payment due date is easy because it always displays on your online account from the lender. You should also download their mobile app if you can which makes logging in and seeing your information much easier.

Pay More Than the Minimum

You need to at least pay the minimum each month, but you can always pay more if you are able to. Paying more than the minimum means less interest is applied to the remaining balance which saves you more money in the long term.

Paying off your entire balance in full is the best course of action because your credit score will drop if you have credit card balances that are more than 30% of the available credit.

This will also lower your credit utilization. Most lenders don’t want to see you using all the credit that you have available because it signifies that you might not be doing well financially.

Keep Track Of Your Credit Score

Once you have your first credit card, you need to make sure you are keeping track of your credit score. There are many companies that provide you with free access to accounts where you can check your credit score. You can also get a free credit report every 12 months from Experian, Equifax, and Transunion. These are the three major credit bureaus.

By viewing your credit score every few weeks or months, you can make sure there is no false reporting. You can also know your credit score before applying for loans which will give you a better idea of if you may be approved and on what terms.

In Closing

As you can probably tell by now, establishing credit at 18 sets you up for financial success. Getting your first credit card or job might seem daunting, but it will help you in the future when it’s time to get your first mortgage or car loan. Once you have good credit, the rest of the process is easier.

Some of the best ways to establish credit when you’re 18 is to become an authorized user on a credit card or to get your own credit card. You can also get your first job and start monitoring your credit score to make sure you are building it up. There are some credit cards specifically meant for young people that can help you get approved and get started with your first credit card.

Shawn Manaher

Shawn Manaher

Shawn Manaher is a former financial advisor, has founded 5 online businesses, and is a coach, speaker, podcast host, and author.

He's been featured on Forbes, The Consults Corner on TAE Radio, The Writing Biz, What's Your Story, and more.

He loves to share his personal finance tips and money management wisdom with others to help them find financial freedom.
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