How to Build Credit at 18

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Good credit is crucial as early as possible in your financial life. Here are some tips on how to build credit at 18 to kickstart a healthy financial life.

Learning how to build credit at 18 years is the foundation of a good financial future. It launches a young financial consumer into a lifetime of good financial habits and rewards. Therefore, young people and students must understand how to start building credit at 18.

Credit is a term that will be a part of your financial journey. It determines whether or not you get access to things such as loans and credit cards from banks, auto lenders, mortgage companies’ credit companies, online lending companies, and more.

Tips on how to Build Credit at 18

good credit at 18

To better understand how to build credit at 18, we must first answer a few questions:

What Credit Score Do You Start With?

If you don’t have any credit record, your credit history is simply non-existent, and thus you have no score. Lending companies and financial institutions use credit scores models calculated by FICO (Fair Isaacs) and Vantage, which range between 300 and 850.

The credit score is determined by the consumer information from credit reporting agencies. Credit reference bureaus, which include Transunion, Experian, and Equifax, track the credit history of credit consumers, which every lender can access to decide whether to issue a credit or not.

So, what does your credit start at? When you take credit, you start establishing a credit history. At that point, you might assume your credit score is 300.

If you sparingly use the credit, pay off debts on time, and create a responsible borrower track record, your credit score will keep improving. You can use one of the national credit bureaus or CreditKarma to access your credit score information, reports, personalized tools, and tips to help build and manage credit.

How to Build Credit as a Student

First, to start building your credit history, you need to have a credit report in your name. That is only possible when you get credit either on the guardians’ name (as an authorized user) or on your name.

If you’re in college, you can apply for a student credit card. If you’re having issues getting approved for a credit card as a beginner, Topcreditfinder is a perfect platform to use.

Credit card issuers offer different kinds of credit cards to college students. Those credit cards have different credit limits but as a beginner, start with the one with a low credit card limit. Some excellent examples of good credit cards include Get Report Double-Dash Card, Journey Student Rewards from Capital One (COF), or Get Report Travel Rewards Credit Card for students.

For information on credit cards, credit, and other financial services, checks out CreditGuideUS, an excellent credit information aggregator.

If you use the student credit cards well and demonstrate you’re a responsible borrower, it becomes a pathway to getting a traditional credit card and other loan products. And, to organize and plan how to clear your credit cards debts, consider Tally. This is an ideal app that can help you handle your credit cards debts optimally.

Why do you need Good Credit as an 18-year Old?

One significant benefit is that you can get loans for 18-year-olds. Start with small loans that you can manage to repay without missing, like a few thousand dollars for a second-hand car.

When you pay it back on time, it will show creditors that you’re a good credit risk consumer. Thus, you’ll increase your chances of getting credit and loans with better terms.

How to Build Credit at 18: Step-by-Step Guide

Credit card

1. Become an Authorized User

While age doesn’t affect your credit score directly, you barely have any credit history at 18. And, zero credit history means no credit score.

The first step towards building your credit score is getting someone to make you an authorized user on their credit card. If the person has a good credit history, it positively affects your credit score. This person can be a parent, guardian, or a trusted friend.

However, since their financial habits will directly affect your budding credit score, ensure you choose someone with good credit and who makes timely credit card payments.

2. Understand the Basics

Learning how to build credit at 18 will be challenging if you don’t know what a credit score entails and how it works. Therefore, take time to learn some basics about credit scores and credit reports.

Remember, whenever you need a loan, lenders will use this score to determine whether or not you qualify for the loan. The higher score you have, the higher are your chances of getting a loan.

Also, most lenders use the FICO scoring model to approve or reject your loan application, and thus you need to understand what it entails.

3. Apply for a Credit-builder Loan

Since you want to have a credit history, taking out a loan is an excellent option. You can start by applying for a credit-builder loan, which is available from community banks and credit unions.

With a credit-builder loan, the money will remain in your savings account until the end of the loan’s term, when you can access it. However, since you’ll need some proof of income, ensure you pick a loan amount that you can service.

When you are through paying for the loan, you’ll have some credit activities reported to the credit bureaus and some savings.

You can also apply for a loan from various online lenders who don’t require you to have a credit history.

4. Apply for a Student Loan

 Acquiring a student loan purely to build your credit score isn’t the best strategy. This is mainly because the credit score will only generate once you’ve started making repayments.

However, once you’ve opened that student loan account, you have already started building some credit history. Since student loans are visible on the credit report, they will subsequently determine your credit score.

5. Get a Secured Credit Card

Since you don’t have a credit score, getting a credit card might be tricky. However, you can surely start with a secured credit card.

This credit card type requires you to make a deposit as surety for your new credit line. Your deposit also acts as your credit limit, meaning you can only charge that much on your credit card.

With a secured credit card, you get a chance to borrow and repay your credit limit. If you make timely repayments, you build your credit history and can receive your deposit back once you’ve canceled the card.

But, if you don’t pay on time, you might lose your deposit to the lender.

Key Takeaway

Building credit at 18 is highly advisable and a perfect financial decision. Use CreditSesame to guide you throughout your financial journey. This platform teaches a lot about credit, financial services, and how to grow and manage your financial wealth.

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