How to Responsibly Build Credit – Starting Young
Young Hispanic woman demonstrates how to build credit as a young person by paying for her groceries with a credit card

Having good credit is important for many reasons. From renting an apartment or purchasing your own phone plan to obtaining insurance or getting a new job, you would be surprised how often people may look at your credit score. Having a good credit score can make you a prime candidate for a landlord to accept you as a tenant or for a new employer to hire you.

“Adulting” is a little easier if you start building credit early. If you are fresh out of high school or working your way through college, you may wonder how to establish credit as a young person. In this article, we’ll teach you how to build credit at 18.

Make Your Payments on Time

Spending more money than you can pay off or being late on your payments are two of the quickest ways to develop a bad credit score. To prevent this, ensure you pay off your purchases on time. Setting up automatic payments for routine things like rent and insurance will help with this.

Make Small Charges and Pay Them Off

Building good credit requires you to use your credit card consistently. Try to spend at least $50-100 each month and be sure to pay it off immediately. If you think you will have a problem with overspending, you can apply for a low-limit credit card. These cards will cap your spending at a predetermined amount like $300 so that you only spend as much as you can pay off.

Avoid Credit Card Debt

Debt is a major factor in evaluating your credit score. Don’t be afraid to spend, but maintain smart financial habits. Debt comes from failing to pay off your purchases each month; the money you owe can grow as interest and penalties can accumulate, so keep up with your payments.

Create a Budget

Build a monthly budget to keep track of your regularly occurring purchases. Once that baseline spending is accounted for, plan for large purchases. This way, you can make a large purchase with a surety that you can pay it off. Pay off the entire balance at the end of each cycle, and don’t let a balance carry on to the next cycle because it will add interest.

Spend within Your Means

If a purchase is beyond the funds available in your budget, don’t buy it. Just because your credit card will let you make the purchase does not mean it’s the best idea to do so. If you don’t have enough money budgeted in your account for a big purchase, wait to buy it until you do.

Piggyback Off a Parent’s Credit

Knowing how to build credit at 18 might require piggybacking. You can become an authorized user on a parent’s credit card if they have a good credit history and maintain a low balance. Some accounts will even let you have your own card. Build up your credit history while your parent keeps an eye on the balance. This can translate to a good credit score when you set up your own account. On most accounts, this can only be done until you turn 21.

Pay Off Your Student Loans

If you relied on student loans to get through college, don’t delay paying them off. This can start once you get settled into a full-time job. Be sure to stay on top of your payments whenever you do start paying them; lenders typically report the loan to credit bureaus with your name attached to it. Paying off student loans can help improve your credit score, so don’t put them off for too long.

How Long Does It Take to Establish Credit?

A young man holds up his credit card to make an online payment from his phone

As a young credit card holder, it may take up to six months to establish credit. You can make the most of that time by making payments promptly, keeping to your budget, and avoiding debt. Follow these steps and you will be off to a great start on your credit score journey!