How To Start Building Credit At 18


Young people may not understand the importance of credit. In fact, that shouldn’t be the case.

According to SoFi’s certified financial planner and senior manager of financial planning, “your credit score influences your capacity to receive a loan, the interest rate you pay, the ability to secure an apartment, and sometimes even the ability to get a job.” However, financial literacy is rarely covered in the classroom, and that includes the impact credit has on the majority of your life’s most significant financial decisions.

How To Start Building Credit At 18?

According to the stats, it’s true. According to a recent poll conducted by U.S. News, more than half of all respondents obtained their first credit card on their own after leaving high school or while attending college. In addition, sixteen percent of those who filled out the survey admitted they had no idea how credit cards functioned when they first got one.

That’s a serious issue, as credit card use is highly predictive of future creditworthiness. What is the minimum age to begin establishing credit? Credit cards are available to anyone who are at least 18 years old, and they may be used to begin establishing a positive credit history as early as that age. Credit can be established at a younger age with parental assistance. If you’re under 18 and want to start establishing credit, read on.

To start, learn the fundamentals of credit.

1. Knowing the fundamentals of credit is a prerequisite before taking any further action.

  • Experian®, Equifax®, and TransUnion® are the three primary credit reporting bureaus that keep track of your credit report. Various reports might be made by various departments. Your credit score is based on the information in that report. This is determined by applying a credit scoring algorithm, such as VantageScore 3.0® (included in Chase Credit Journey) or FICO® (Fair Isaac Corporation).
  • All of the aforementioned can have an impact on your credit score, but how much depends on your future actions.
  • Once each year, you are entitled to a free copy of your credit report from each of the three main credit agencies. Your interest rate on loans and credit cards in the future will be based on information from your credit report. There is a direct correlation between your credit score and your interest rate; a better score usually results in a higher rate of interest.

2. Activate your account by becoming a verified user.

Do you know someone with excellent credit who would be willing to add you as an authorised user on their account? Someone who has been given permission to use someone else’s credit card is called an authorised user. This might serve as a first step toward establishing credit.

  • Even if you don’t use your card, any recent action (if it’s in good standing) might raise your score. Both you and the primary cardholder stand to lose if any of you incurs excessive debt.
  • Make sure that the credit card company records approved user activity before you add an additional user. You can’t improve your credit score if you don’t use credit.

3. Obtain a student credit card.

The use of credit cards may be an excellent first step in establishing a positive credit history. Some credit cards may be out of reach if you don’t have a credit history. A student credit card is a good option for those who are still in school.

Getting a secured credit card is another option for building a credit profile. A security deposit or collateral is needed for a secured credit card. Your credit limit will be equal to the amount you deposit, which is normally between $200 and $500. Chase doesn’t provide secured credit cards, although they function similarly to regular credit cards. If payments are late, you’ll be hit with late penalties on top of potentially high interest rates and maintenance costs.

4. Establish a solid credit history by always paying on time

  • One of the greatest ways to improve your credit is to have a positive payment history.
  • There are repercussions for being late on payments beyond just your credit card amount. To build up a solid credit history, it’s important to pay off all of your debts on time. Failure to make payments on time can have a negative impact on a person’s credit score.
  • Signing up for automatic payments is one method to avoid late fees and other penalties.

5. Maintain a stable stance

  • A high ratio of available credit to total credit is a negative indicator of financial responsibility. A component of your score is determined by how much you owe in relation to your available credit.
  • The common recommendation is to keep your credit usage below 30 percent. In most cases, 10% is a far more reasonable goal to go towards.
  • It’s better to settle your monthly balance in full. This will help you minimise interest costs and maintain low use.

6 Get a student loan

  • If your goal is to improve your credit score, a loan may be the way to go. Despite the fact that Chase does not provide them, you may find that a student loan is necessary to cover your educational expenses.
  • Your credit report will include all of your student loan accounts, whether they are federal, private, or refinancing. When you begin making payments on a loan, this will have an effect on your credit score.

7. Regularly review your credit record and score.

To avoid any hiccups when you establish your credit history, get your affairs in order immediately. Chase Credit Journey gives you free access to your credit score. Check for any mistakes to make sure everything is correct. Dispute any inaccuracies on your credit reports by contacting the three major reporting agencies.