How to Start Building Credit at 18?
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How to Start Building Credit at 18?

Moumita Basu

Based on your financial history and credit score, lenders can determine your level of dependability. Build credit at age 18 to be eligible for a future low-interest vehicle loan, apartment lease, or student loan in your own name.

You can save a lot of money on interest and fees if you have a high credit score. In contrast, it's likely that you have little to no credit history when you first become an adult. This implies that without a co-signer, you would have problems getting approved for a loan or renting an apartment. You should spend some time learning how to develop credit at the age of 18 in order to be eligible for a loan on your own or to increase your chances of getting reduced interest rates.

Let’s learn about basics of how to start building credit at 18 and what are some of the easy ways to build credit at 18.

Importance of Building Credit at 18

Having good credit means more than just being able to make purchases with a credit card. You'll need to be able to rely on your credit history as a fully independent adult for everything from getting a telephone and utilities in your name to being eligible for the best car insurance rates. Your application's acceptance will be heavily influenced by your credit history. It will also influence if you must make additional security deposits and how high your interest rates will be. Here are the benefits of building credit at 18:

  • Your credit may be checked by landlords before they approve your application for an apartment, and it will be important when you buy your first automobile to commute to work every day.
  • When you are looking for your first job, potential employers may take into account your credit history but not your credit ratings.
  • Obtaining an apartment, a credit card, or a loan might be more challenging and potentially more expensive without a credit history.

Is It Possible to Build Credit at 18?

Absolutely, you can start to build credit at 18.  It takes time to establish a credit history, and delaying can make it harder to live independently. It's crucial to start establishing a solid credit history as soon as you become eligible for credit. When you are looking for your first job, potential employers may take into account your credit history but not your credit ratings. Obtaining an apartment, a credit card, or a loan might be more challenging and potentially more expensive without a credit history.

How to Build Credit at 18 with No Credit?

Lenders can be hesitant to approve you for an account if you've never had credit in your name before. However, there are a number of best ways to build credit at 18:

  • Learn about the fundamentals of credit
  • Review Your Credit Report & Score
  • Become a Registered User
  • Register for a Secured Credit Card
  • Take Student Loan
  • Maintain Low Credit Card Balances
  • Establish Credit By Making Timely Payments
  • Obtain a Credit-Building Loan
  • Try For a Job
  • Pay more than the required minimum

Let’s explore more about how to build a good credit score at 18:

Learn About the Fundamentals of Credit

Before starting establishing credit at 18, you should have a fundamental understanding of how credit works before moving forward. The three primary credit reporting agencies, Experian®, Equifax®, and TransUnion®, keep track of your credit record. Separate reports may be produced by each bureau. Your credit score is determined by the information in the report. Your FICO® credit score is primarily determined by the following factors:

  1. Payment history
  2. Credit utilization
  3. Length of credit history
  4. New credit
  5. Credit mix

All of the aforementioned can have an impact on your credit score depending on your future conduct. Your free credit report must be provided to you by the three main credit reporting bureaus once a year. Your interest rate on credit cards and loans will be determined by future lenders using your credit report and score. If you have a high score, your interest rate will probably be lower; if you have a low score, your interest rate will probably be higher.

Review Your Credit Report & Score

You must review your credit score and credit reports frequently to monitor your improvement. A free credit score website or your credit card provider both let you check your credit score for free. Typically, you are only permitted to check it for free once a year.

Verify the accuracy and completeness of the information in your credit reports. Because lenders might not disclose information to all three credit bureaus, be sure to check all of your reports. Contact the credit bureau that possesses the information on your report if you believe it to be erroneous or incomplete.

Become a Registered User

Another best way to build credit at 18 is to ask a person with good credit to add you as an authorized user on their credit card is one technique to get payment history on your report. If their good payment history is included on your credit report when they add you, it can raise your credit score. The drawback of this tactic is that it can affect your credit score negatively if the individual who names you as an authorized user makes a late payment.

Register for a Secured Credit Card

The best way to build credit at 18 is to open a secured credit card if you want to be in charge of your own credit card. A secured credit card is one that offers a credit line in exchange for a security deposit. Your credit limit—the most you can charge—becomes the amount you deposit.

You can opt for Zolve Azpire Credit Builder Card as it is more likely that your application will be approved if you have little to no credit history.

When you cancel the card, you usually get your deposit back as long as you pay back the money you borrowed on time. You run the danger of the lender keeping your security deposit if you don't make your credit card payment on time.

Take Student Loan

It's not a smart idea to take out student loans just to establish credit because your credit score won't be created until you start making payments. However, as soon as you open a student loan account, you'll begin developing a credit history. Private, federal, and refinancing student loans all show up on your credit report and eventually affect your score.

First, take out federal loans since they offer superior borrower safeguards, such as income-driven repayment schedules and forgiveness initiatives. The majority don't demand a credit check. To apply, complete the FAFSA, or Free Application for Federal Student Aid. Most students require a cosigner to be eligible for private student loans because they are credit-based.

Maintain Low Credit Card Balances

Maintain a low credit usage ratio—the amount of credit you are using compared to your credit limits—to raise your credit score. Keep your credit utilization rate below 30% as a general guideline. If your credit card limit is $1,000, this means you should strive to borrow no more than $300. Because the amount you owe makes up 30% of your credit score. If your credit utilization rate rises too much, this could hurt your score.

Establish Credit By Making Timely Payments

Making on-time payments is one of the best things you can do to improve your credit because payment history is a crucial component of your credit score. Making prompt payments affects more than just your credit card balance.

To build good credit, you should pay all of your obligations on time, including student loans, vehicle loans, and other debts. Your credit score may suffer as a result of missed or late payments. Enrolling in autopay is one approach to ensure that you never forget to make a payment.

Obtain a Credit-Building Loan

Normally, community banks and credit unions offer credit-builder loans. Additionally, you might look into loans through internet businesses. The money you borrow when you take out a credit-builder loan is kept in a savings account that you can retrieve at the conclusion of the loan period.

One of the good ways to start credit building at 18 is to pick a small loan amount because you'll need proof of income to verify that you can make the installments. The financial institution informs the credit reporting agencies of your timely loan repayments. At the end of the loan term, you’ll end up with better credit and some money saved, making it a win-win.

Try For a Job

You are already ahead of the game if you are employed. Getting a job before turning 18 can help you establish a solid financial base. Although having a job is a terrific method to persuade a potential primary cardholder to allow you to use their account as an authorized user, work experience does not always help you build your credit.

You can demonstrate to them that you wish to have some stake in the outcome and that you are willing to accept responsibility for some of the account's transactions. When you apply for your first credit card, it will also assist if you have a consistent source of income. Lenders want to make certain that you can repay the money you borrow before they issue a new credit card.

Pay more than the required minimum

One of the good ways to build credit at 18 is to make on-time bill payments. Ensure that you are paying your bills on time and in excess of the required minimum. You can reduce your overall balance even more by making a larger payment than the required minimum, which will boost your credit utilisation.

Another crucial factor in determining your credit score is your credit utilisation, or the total amount you owe. Your credit score will rise the more debt you pay off.  You should try to pay off your entire balance each month if at all possible.

How Long Does it Take to Build Credit at 18?

Depending on how carefully and frequently you use and manage credit, it can take six months or even a year. It takes significantly more time to establish a strong credit rating. Just keep working towards it if you want to get and then maintain a credit score in the excellent range.

Make sure everything is in order before you begin to establish credit. Access your credit score and verify that there are no errors. Inform the major credit reporting bureaus of any errors you find. To determine whether a consumer's credit history satisfies their risk standards, many credit card issuers send credit offers to those they have already pre-screened. Apply for Zolve Credit Builder Card as it comes with no deposits, no annual interest rate, no additional charges and upto 15% cashback & rewards.

Frequently Asked Questions(FAQs)

Can you establish credit before 18?

Building credit for your child will enable them to subsequently borrow money for significant expenditures and help them develop a good credit history. The good news is that your youngster can begin establishing credit before turning 18 years old. Set your child up for success with credit so they can have a bright financial future. It can be beneficial to add a minor as an authorized user to help them establish credit. The payment histories of every person who has a card in their name, including card members and authorized users, are sometimes reported by card issuers to the credit bureaus.

What is the fastest way to build credit at 18?

Getting a secured credit card is one of the easiest and fastest ways to build credit at 18.

Do you have a credit score at 18?

Yes, you can start building credit at 18. For most widely used credit-reporting models, starting credit score at 18 doesn’t exist as most people won't have credit reports before turning 18. You typically have to be at least that age to open a credit card in your own name. If you've never used any form of credit before, there's no way to track your credit usage. And in many cases that means credit reports and scores may not exist.

How to establish credit at 18?

Follow these easy ways to build credit at 18:

  • Recognize the fundamentals of credit.
  • Obtain user authorization.
  • Obtain your first credit card.
  • Establish credit by making timely payments.
  • Maintain a low balance.
  • Borrow money for school.
  • Check your credit report and score frequently.

How to improve your credit score at 18?

You can improve your credit score with the following practices:

  • Examine your credit report
  • Pay all pending invoices
  • Keep low Credit Utilization
  • Keep old accounts in the report
  • Make a credit plan
  • Reduce the number of hard inquiries
  • Debt consolidation