How to Build Credit at 18 | BankruptcyHQ
Start building credit at the of 18, Become a co-signer on someone else’s credit card, get a secured card, or take out a credit-building loan.
Based on your financial history, your credit score shows lenders how trustworthy you are. Build credit while you’re still young enough to qualify for a low-interest vehicle loan, an apartment, or a school loan in your name.
When it comes to establishing credit at any age, these elements are critical:
- Payment history: Maintaining a high credit score requires timely payment of all expenses. A payment that is 30 days or more late can lower your credit score.
- Credit usage is the percentage of your credit card balances to the credit limits. Try to spend 30 percent or less of your available credit; the lower, the better. When you first have a credit card, you may use it to make minor expenditures, such as a cup of coffee, and then pay the amount off by the due date.
Your credit score is also affected by the duration of your credit history, the mix of account types you have, and how recently you applied for new credit, although not as much as paying on time and using less of your available credit. You may expect to receive a FICO score after six months of payment history and a VantageScore in as short as 30 days after you start using credit.
Because being accepted for a credit card as an 18-year-old might be difficult, keep these tactics in mind as you learn how to develop credit. If you research to apply for a credit card, spend some time studying the finest credit cards for your needs, paying close attention to the eligibility conditions.
Become a registered user : Build Credit at 18
Your age has no bearing on your credit score, but it does imply you’ll have a thin credit file. When you become an authorized user on someone else’s credit card, you have access to their account’s history.
Because the principal cardholder is responsible for payments, be sure the parent, friend, or family member you designate has strong credit and manages money responsibly. To benefit from being an authorized user, you do not need to use the card.
Ask the main cardholder whether the credit card business reports authorized user behavior to the three major credit agencies before you become an authorized user. Your credit score is calculated using information from your credit reports.
Obtain a credit-building loan
Credit unions and community banks are the most common sources of credit-builder loans. You may also look at loans from online lenders like Self and Kikoff.
When you get a credit-builder loan, the money goes into a savings account that you may retrieve after the loan period. Choose a smaller loan amount since you’ll need income to prove you can make the installments.
The financial institution records your on-time payments to the credit agencies when you make them toward the loan. You’ll wind up with higher credit and some money saved after the loan term, making it a win-win situation.
Take out a secured or no-deposit credit card
If adding yourself as an authorized user isn’t a possibility, a secured credit card might be the solution. Secured cards need a deposit, normally between $200 and $2,000, and serve as your credit line. Alternative credit cards that do not demand a security deposit are also available.
To qualify for a secured card, you’ll need to have a steady source of income, although the need is lower than for standard credit cards. To qualify for a secured card, you may also require a checking or savings account, depending on the secured card provider. Check sure the product reports to at least one credit bureau before applying.
You may use the protected card in the same way that you would a standard credit card. To avoid paying additional interest and to create solid credit as early as possible, pay off your whole bill on time each month.
You may apply for a regular, unsecured credit card after your credit score has improved. If you’re under the age of 21, you’ll also need to show that you have a consistent source of income from full-time employment.
Obtain a student loan : Build Credit at 18
It’s not a smart idea to take out student loans merely to improve your credit score, particularly because you won’t get a credit score until you start making payments.
However, once you create a student loan account, you’ll begin to develop a credit history. Private, federal, and refinancing students show on your credit record and ultimately affect your credit score.
Borrow federal loans first because they provide more borrower safeguards, such as income-driven repayment plans and forgiveness programs. The majority of them do not demand a credit check. To apply, complete the Free Application for Federal Student Aid, sometimes known as the FAFSA.
Because private student loans are dependent on credit, most undergraduates will require a co-signer to be eligible. The loan will show on the credit records of both the student and the co-signer. Compare numerous loan alternatives to get the one with the lowest interest rate.
Consider refinancing student debts after you’ve graduated and your credit has improved. On an 850-point scale, you’ll need a score of 690 or better.
Refinancing may result in a cheaper monthly payment or lower interest rate and the consolidation of various loans into a single account. Because you’ll have fewer accounts with balances, this might enhance your credit score.