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How to Build Credit at 18

Last Updated: November 6, 2024
8 min read
Getting a credit card

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Key Points:

  1. You may improve your ability to rent an apartment, get car insurance, and qualify for loans if you start to build your credit at eighteen.

  2. You’re eligible to open your own credit card account when you turn eighteen.

  3. You can learn how to build credit at eighteen by knowing what mistakes to avoid.

The freedom of adulthood can be exciting, but you may want to consider the importance of financial freedom. When you build a good credit history, it could help you rent an apartment, get car insurance, or sign up for a phone plan. 

 

In fact, a good credit score goes a long way on your odds of a lender approving your application for a personal loan, credit card, or auto loan. Plus, you could get a better interest rate on these loan products. 

 

Eighteen is the earliest age you can apply for credit in your own name, so it’s helpful to learn the best ways to build excellent credit early. We’ve identified some key strategies to adopt and common mistakes to avoid as you build your credit.

The basics of building credit

You can’t learn how to build credit at eighteen without understanding some of the key elements of credit. In simple terms, good credit means borrowing and repaying money from lenders over time.

 

You also need those lenders to report your activity to a credit bureau that records your history. A credit bureau tracks your borrowing activity, on-time payments, and other details reported by your lenders. That information then gets converted into a three-digit credit score, which new lenders may use to decide if you’re a responsible borrower who’s likely to pay them back on time.

Once you use a credit account, it can take up to six months for a credit bureau to have enough information to generate a credit score.

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Advantages of building credit at 18

There are ways you might not expect good credit to come in handy. For example, some employers (especially in the finance industry) and landlords may require a credit check. Even phone services may want you to have good credit to qualify for certain mobile plans.

Another benefit to building credit at eighteen relates to the length of your credit history, a key factor in building strong credit. The earlier you start building credit, the sooner you’ll start the clock on your history and enjoy the benefits of good credit.

Strategies to build credit at 18

It may surprise you that you can start building credit as a teenager. These strategies provide steps you can take to move toward financial independence.

Get a secured or student credit card

If you have little to no credit history, a secured credit card can be a great option for a first credit card. A secured card provides a line of credit backed by a deposit. First, your credit issuer approves you for a credit limit. Next, you pay a deposit equal to that credit limit.

 

Unlike a debit card, a secured credit card allows you to pay with credit. Your purchases don’t come out of your bank account. Instead, you could spend up to your credit limit and make payments toward your account balance, like any other credit card. Your credit card company reports your activity to one (or all) of the major credit bureaus which helps you build credit history.

Keep in mind that your credit card issuer can keep your deposit if you don’t pay your bill. With a Discover it® Secured Credit Card, you can get your deposit back after six consecutive months of on-time payments and maintaining good status on all your credit accounts.1

 

A secured credit card can help you build credit with responsible use, which can also help you later qualify for an unsecured credit card. Consider looking for a secured credit card with no annual fees and cash back rewards.

Did you know?

Student credit cards are ideal for college students with limited incomes and credit histories. Some student credit cards, including the Discover It® Student Chrome card, offer opportunities for you to learn healthy credit habits and even earn rewards.

Learn More

Apply for a student loan

You may consider a student loan if you need more funds for college. Not only are you establishing an early credit history, but you can also use your student loan to help your credit score by making on-time payments when your loan comes due. And, if you only have a credit card account, adding a student loan to your credit profile can diversify your credit mix. Your credit mix includes the unique kinds of credit accounts you have, and typically accounts for 10% of your credit score.

Become an authorized user

It may seem counterintuitive to depend on others to gain financial freedom, but that’s not the case. When you become an authorized user on someone else’s credit card, the activity on the account becomes your own credit history.

 

The credit card company won’t require any financial information for you to become an authorized user. This is because the account holder is responsible for submitting payments. You’ll want to make sure that if you become an authorized user that the card holder is responsible; if they miss a payment or show a high balance, that will show up on your report.

If your card issuer reports the account activity to credit reporting agencies under your name, it can help you establish a positive credit history. Discover reports account information for authorized users to credit bureaus, but not every card issuer does.

 

Though you must be eighteen to open your own credit account, some credit card issuers may allow authorized users under eighteen. Discover allows individuals starting at age 15 to become authorized users.

Check your credit score

No matter how you build credit, monitoring your progress by checking your credit score is essential. Beyond just the score, review how you’re doing with the five categories that go into your credit score: payment history, amounts owed (also called credit utilization), length of credit history, new credit, and credit mix. And remember that credit scores fluctuate. Your score will likely go up and down over time.

Checking your credit score is easy and often free. Most credit card companies provide cardmembers with free access to credit scores. With a Discover credit card, Stay on top of your recent FICO® Credit Scores for free on mobile and online.2

What not to do when building credit

One of the keys to building credit at eighteen is knowing what not to do. Avoid these common mistakes.

Late payments

It may be easy to think that paying late or missing a credit card payment here or there won’t matter, but your payment history is the most significant contributing factor to your credit score. Every late payment can set you back, even if it’s just by one day. This is especially true if you’re building your credit from scratch. On-time payments signal to creditors that you’re responsible with credit and might be able to handle more.

 

Consider using your mobile app alerts to remind you about payment due dates.

Overspending

When you spend more than you can afford, it can hurt your credit if it makes you miss payments or carry a high balance. A good budget can help you avoid unnecessary debt. Fortunately, creating a budget is not as complicated as you might expect. Consider the 50-30-20 Rule, which provides the framework for prioritizing necessities over nonessentials.

Too many credit inquiries

While getting a credit card may be a good way to build credit, applying for too many credit cards at once can have the opposite effect. When you apply for a credit card, a lender may make a hard inquiry credit check. Hard inquiries can stay on your credit report for up to two years. Too many hard inquiries in a short time may indicate to lenders that you need help managing your finances. As a result, lenders may view you as high-risk and credit approval might be difficult.

High credit card balance

If you’re trying to build your credit, it’s a good idea to keep your credit card balance low or pay it off entirely each month. Carrying a high balance on your credit card can impact you in a few ways:

  • The mounting debt due to interest fees can be hard to pay down and lead to late payments. Late payments can negatively impact your payment history and impact your credit score.
  • Carrying a high balance impacts your credit utilization ratio (how much of your overall available credit is in use). A high credit utilization ratio can also impact your credit score.

Build credit beyond 18

You can start building credit at eighteen and sometimes even earlier, but maintaining good credit is a lifelong process. Your credit isn’t something you can establish overnight. It takes years of responsible financial management. But using the strategies outlined here can help you jump-start your credit history.

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