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How to Build Credit at 18

Jerry Brown • May 30, 2024

An 18-year old girl celebrates getting her first credit card with her mother and father.

Whether you’re trying to rent an apartment or take out a car loan, having good credit can help you get approved and qualify for the lowest interest rates. However, as an 18-year-old, your credit profile might be too thin to qualify without a cosigner.

Fortunately, you can take steps to beef up your credit history so you can qualify on your own down the road. We’ll cover the basics of credit, how to start building credit at 18, and some common mistakes to avoid.

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The ABCs of building credit

Before you learn how to build credit at 18, take some time to understand how it works.

Generally speaking, when you take out a loan, your lender reports your payments to the three major credit bureaus: Equifax, Experian, and TransUnion. Making on-time payments helps you build a positive credit history that can boost your credit score. On the flip side, late payments can drag your score down.

Your credit score is a three-digit number that often ranges from 300 to 850, according to the most popular FICO® scoring model. The higher your score, the more likely a lender will trust you to repay a loan.

FICO calculates your score based on various factors like:

  • Your payment history
  • How often you apply for new credit
  • Your credit utilization (how much available credit you’re using)
  • The length of your credit history
  • Your credit mix¹

The benefits of building credit at 18

The sooner you start building credit as a beginner, the earlier you can unlock the perks of good credit. Plus, building your credit at an early age can help stop you from becoming “credit invisible.” Credit invisible means you don’t have credit history with the major credit bureaus or not enough history to generate a credit score.²

Excellent credit can help you qualify for the lowest rates on financial products like mortgage loans, personal loans, and auto loans. Achieving a top credit score could save you thousands of dollars over your lifetime. It can also help you qualify for an apartment since landlords generally review your credit history.

Good credit can also help you qualify for lower auto and home insurance rates. If an employer reviews your credit history, it can also help you qualify for a job.

6 ways to build credit at 18

You can start building credit in several ways at 18. Here are a few options to consider.

1. Open a student or secured credit card

If you’re a student, consider applying for a student credit card. These cards can help you build credit if you have minimal or no credit history. You can use it like a normal credit card, but it often comes with lower credit limits.³

Another option is to open a secured credit card. Unlike a traditional card, credit card issuers require a cash deposit that helps establish your credit limit. When you close the card, the issuer generally issues you a refund if you’ve paid your balance in full.

2. Get a credit building loan

Taking out a credit building loan could also help you build credit. Instead of a lender issuing you a lump sum of money like a personal loan, you pay the lender in monthly installments plus interest. The lender deposits these payments into a savings or certificate of deposit (CD) account.

Once you finish paying the loan, the lender returns the original loan amount to you, minus any fees.

3. Become an authorized user

If you have a parent or family member with top-notch credit, ask them to add you as an authorized user on one of their credit card. After you become an authorized user, a credit card company might report the card’s history to credit bureaus.

Once the positive information is added, it could improve your score. However, a potential downside is that if the primary cardholder misses a payment, it could harm your credit file.

4. Pay all of your bills on time

Payment history accounts for the largest portion of your credit score. If you fail to repay them as promised, the company can report your late payments to the credit agencies.

Enroll in autopay to pay your bills on time. Just make sure you have enough money in your savings to avoid potential overdraft fees.

5. Check your credit score and credit reports

To review your progress, check your credit score and credit reports. You can find your credit score for free on many sites or even on your bank’s app. You can access copies of your credit reports from all three bureaus for free weekly at AnnualCreditReport.com.

If you notice any errors while reading your credit reports, dispute them with the respective credit bureau.

6. Keep your credit utilization low

The second most important credit scoring factor is your credit utilization ratio. To calculate it, divide your card’s total credit limit by your outstanding balance. For example, if your balance is 300 and your credit limit is $1,000, your credit utilization is 30%.

Try to keep your utilization at 30% to maintain a healthy score. That said, having a ratio closer to 0% can help your score even more.

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Mistakes to avoid when building good credit

When building credit, work to avoid these common mistakes.

  • Overspending: Borrowing more than you can afford can lead to late payments or defaulting, which can cause major harm to your credit.
  • Limit credit inquiries: When you apply for credit, lenders usually perform a hard credit check that can temporarily ding your credit. Space out your applications to minimize the negative impact on your score.
  • Maxing out your credit cards: Try not to max out your cards since doing so can substantially increase your credit utilization ratio.
  • Making a late payment: Strive to have a perfect payment history. Once your payment is 30 days past due, a lender can report it to the credit agencies.

Building credit early can save you thousands in the future

Learning how to build credit at 18 can give you a headstart on lowering your lifetime borrowing costs. To build and maintain a healthy score, commit to always practicing sound credit building habits.

Want to learn more ways to build credit? Check out our guide on how to build credit without a credit card.

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  • No interest~
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† FICO® Scores are developed by Fair Isaac Corporation. The FICO Score provided by ConsumerInfo.com, Inc., also referred to as Experian Consumer Services ("ECS"), in Experian CreditWorks℠, Credit Tracker℠ and/or your free Experian membership (as applicable) is based on FICO Score 8, unless otherwise noted. Many but not all lenders use FICO Score 8. In addition to the FICO Score 8, ECS may offer and provide other base or industry-specific FICO Scores (such as FICO Auto Scores and FICO Bankcard Scores). The other FICO Scores made available are calculated from versions of the base and industry-specific FICO Score models. There are many different credit scoring models that can give a different assessment of your credit rating and relative risk (risk of default) for the same credit report. Your lender or insurer may use a different FICO Score than FICO Score 8 or such other base or industry-specific FICO Score, or another type of credit score altogether. Just remember that your credit rating is often the same even if the number is not. For some consumers, however, the credit rating of FICO Score 8 (or other FICO Score) could vary from the score used by your lender. The statement that "90% of top lenders use FICO Scores" is based on a third-party study of all versions of FICO Scores sold to lenders, including but not limited to scores based on FICO Score 8. Base FICO Scores (including the FICO Score 8) range from 300 to 850. Industry-specific FICO Scores range from 250-900. Higher scores represent a greater likelihood that you'll pay back your debts so you are viewed as being a lower credit risk to lenders. A lower FICO Score indicates to lenders that you may be a higher credit risk. There are three different major credit reporting agencies — the Experian credit bureau, TransUnion® and Equifax® — that maintain a record of your credit history known as your credit report. Your FICO Score is based on the information in your credit report at the time it is requested. Your credit report information can vary from agency to agency because some lenders report your credit history to only one or two of the agencies. So your FICO Score can vary if the information they have on file for you is different. Since the information in your report can change over time, your FICO Score may also change.Credit score calculated based on FICO® Score 8 model. Your lender or insurer may use a different FICO® Score than FICO® Score 8, or another type of credit score altogether. Learn More

¹ Information from myFICO's "How are FICO scores calculated?" as of May 9, 2024: https://www.myfico.com/credit-education/whats-in-your-credit-score

² Information from the consumer financial protection bureau's "Who are the credit invisible?" as of May 14, 2024: https://www.consumerfinance.gov/about-us/blog/who-are-credit-invisible/

³ Information from Experian's "How is a student credit card different from a regular credit card?" as of May 9, 2024: https://www.experian.com/blogs/ask-experian/how-is-a-student-credit-card-different-from-a-regular-credit-card/

⁴ Information from FTC's "You now have permanent access to free weekly credit reports." as of May 23, 2024: https://consumer.ftc.gov/consumer-alerts/2023/10/you-now-have-permanent-access-free-weekly-credit-reports

⁵ Information from MyFICO's "How do credit inquiries affect your FICO score?" as of May 13, 2024: https://www.myfico.com/credit-education/credit-reports/credit-checks-and-inquiries

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