Building Credit

The Importance of Building Credit Early

Regardless of your plans for the future, building your credit early and maintaining a good score is vital to your financial well-being. Lucky for you, it’s easy to get started now.


Become an authorized user on a parent’s credit card

Unfortunately this option is not available for anyone, but it is by far the easiest way to build credit from a young age. In general, you cannot obtain a credit card before you turn 18. However, a parent can add you as an authorized user on their credit card much earlier, often with no minimum age.

This can have drawbacks if the parent is late on payments, but generally if the parent has good credit their child can only benefit from being an authorized user. As an authorized user, that credit card shows up in your credit history, and can start building your credit even before you are able to obtain your own credit card.


Deciding on your first credit card

Maybe you’ve been an authorized user on your parent’s card for years, and maybe you haven’t. Regardless, now it’s time to get your own credit card. There isn’t a single right answer as to which one is the best for you, but there are many factors to consider.

If you’re just starting out, it’s best to go with a credit card that has a low or nonexistent annual fee and a low interest rate. Past that, the best card for you depends on your spending habits. Different credit cards have different rewards for different transactions, so consider the categories you spend the most in and do your research.


Understanding what goes into your credit score

The most important factor in your credit score is your payment history. All you have to do to keep this score high is pay your bills on time. The second most important factor is credit utilization, or the amount of your credit limit that you have used. It’s best to keep this below 10% to maximize your score, but you can use up to 30% without too much impact.

The length of time you’ve had credit is also important in determining your score. All you can do to improve this is get started now, so do!

Other things that can affect your score are applying for too many credit accounts or credit cards in a short time, the mix of types of credit you have, and your total balances and debt.

Want to learn more? Visit our Financial Education Resource Center by clicking here.