How to Start Building Credit Once You Turn 18
Having good credit is imperative to unlocking many financial opportunities in life, including lower interest rates on car loans, credit cards and mortgages. The key to getting that high credit score is to start building credit at a young age. That’s why adults as young as 18 might want to consider getting a credit card to build their credit now, thus improving their credit score over time.
Here are five steps you should consider when building credit as early as 18.
1. Build a Credit History
For your birthday this year, consider asking your parents if you can apply for a credit card, and even have them help you fill out the application. You can build a solid credit history by limiting your use of the card and making payments on time every month. Don’t use and abuse your card. Consider using this card for emergencies only. You may even want to use this card solely for gas. This way you won’t use up your limit or ever go into credit card debt.
2. Pick the Card That’s Right for You
It can be hard to qualify for your first credit card on your own. In order to choose the best card for you, consider asking for a student credit card (if you’re a student). This will be a credit card of your own and sometimes has features that allow your parents to oversee your spending. These cards usually have a lower limit, but it will help you build your credit. Just be sure to make on-time payments and not spend too much on the card. Your amount of debt is an important part of your credit scores and spending more than 30% of your limit can have a negative impact.
3. Make Payments on Time
When paying the balance on your credit card, try to make sure it is always on time. Missed or late payments will lower your credit score and negatively affect your credit history.
Once you use your credit card, consider paying it off right away in addition to meeting your monthly, minimum payment. This way you will always have a low balance and on your way to a great credit score. If you can’t pay the balance in full, you’ll incur interest charges, so try not to spend more than you can afford to pay off. That’s a quick way to get into credit card debt.
4. Look at Your Credit Report
The more you stay on top of your credit report, the better your credit history will be. Consider getting a copy of your credit report annually. You can also get two free credit scores, updated monthly, from Credit.com to track your progress as you build credit.
5. Keep It Simple … for Now.
The more credit cards you open, the higher chance you have for falling into debt. Since you are opening a credit line as early as 18, it is important to play it safe until you get comfortable. Once you get the hang of things, then you may consider opening up another credit card to help you continue building your credit over time. If you don’t want to open another credit card, your first car purchase is another opportunity to build credit by using a car loan. This will help you continue building your credit and you should be proud of yourself for the day you get approved for your first loan. You did it on your own!
Leslie Tayne, Esq., is a consumer and business debt-related attorney and advisor. She founded Tayne Law Group, P.C., concentrating solely in debt resolution and alternatives to filing bankruptcy for consumers, small business owners and professionals. In addition, Tayne Law regularly consults and advises on debt management related issues. Her book, Life & Debt, shows how learning to embrace your debt can help you not only like it, but love it. More by Leslie Tayne