Starting to build credit is a key step as you move into adulthood. Credit is like a financial passport for many important transactions. Whether you want to get a loan, buy a car, lease an apartment, or make any big financial purchases, your credit history plays a crucial role. It shows lenders and landlords how reliable you are financially. Many young adults realize when they turn 18 how tough it can be to establish a good credit score without any credit history.
A simple way to build credit is through a credit card, provided you consistently pay off the balance. However, without existing credit, getting approved for a credit card can be tricky, leaving many young adults unsure of what to do next.
Interestingly, you don’t have to wait until you’re 18 to start establishing credit. There are ways to begin even before reaching that age. If you want to ensure a strong start to your credit history or that of your children, consider these tips:
**Become an Authorized User**
Getting a credit card on your own before you turn 18 is often impossible. However, you can start building credit by becoming an authorized user on a parent’s credit card. This way, you benefit from the primary cardholder’s established credit. Keep in mind, this requires a lot of trust between you and the primary cardholder since their credit will be linked to your actions.
**Get a Job**
While a job won’t directly impact your credit score, it’s essential for building credit in the long run. When you apply for credit cards or loans, your employment history is a significant factor that banks and credit card companies consider. If you can work while balancing school, having a job in your early teens can build a solid employment record, showing future lenders your ability to repay debt.
**Consider a Secured Card**
Once you turn 18, you might find it challenging to qualify for a regular credit card. A secured credit card can be a good way to start building credit. With a secured card, you make a deposit (say $1,000) which then becomes your credit limit. Using a secured card responsibly can eventually lead to offers for unsecured cards.
**Apply for a Student Card**
In college, you’ll often see offers for student credit cards. These cards are usually easier to get and often come with rewards for good use. If you’re going to college, a student card can help you start building your financial foundation.
**Develop Good Habits**
No matter your age, good financial habits are key to building and maintaining a strong credit score. Always pay your bills on time and try to clear your balance each month. Keeping up with these habits will help you maintain a stable credit score.
**The Role of Age**
Although you can’t get a credit card before 18, there are steps you can take to start building credit earlier. There’s no specific age when you should start, but the sooner the better. Don’t wait until after college to begin; start developing good financial habits as a teenager. Use student or secured cards in your early twenties to continue building from there.
When you’re ready to start building credit, or when you want to help your children start, the decision is yours. Remember, once you turn 18, don’t delay in working towards a strong credit score.