How do I get credit!
Turning 18 marks a major milestone in your life. You can vote, sign legal documents, and take your first steps into financial independence. One of the most critical aspects of adult financial life is your credit. While many people don’t think about their credit until they need a car loan or a mortgage, building credit early can open doors and set you up for success. This comprehensive article will walk you through everything you need to know about building credit at 18 years old, including why it’s important, how credit works, and actionable steps to establish a solid credit history from the start including applying for secured credit cards and credit building accounts.
What is Credit and Why is it Important?
Understanding Credit
Credit refers to your ability to borrow money and your history of repaying those debts. Your credit is tracked by credit reporting agencies and summarized in a credit report. Based on this report, a three-digit number called a credit score is calculated, typically ranging from 300 to 850. The higher your score, the better.
Why Credit Matters
- Loan Approval: Lenders use your credit score to decide whether to approve you for loans, including student loans, car loans, and mortgages.
- Interest Rates: A good credit score can get you lower interest rates, saving you thousands of dollars.
- Rental Applications: Landlords may check your credit to determine if you’re a reliable tenant.
- Job Opportunities: Some employers review credit reports as part of the hiring process.
- Utilities and Services: Without credit, utility companies may require large deposits to open accounts.
- Financial Confidence: A good credit history shows you’re financially responsible.
Building credit early gives you a head start and more options in life. It’s an investment in your financial future.
How Credit Works
The Credit Bureaus
There are three major credit bureaus in the United States:
- Equifax
- Experian
- TransUnion
These companies collect information about your credit accounts, payment history, debt levels, and more. Lenders report your activity to these bureaus, and the information forms your credit report.
The Credit Score
Your credit score is calculated using several factors:
- Payment History (35%): Do you pay your bills on time?
- Amounts Owed (30%): How much debt do you have relative to your credit limits?
- Length of Credit History (15%): How long have you had credit?
- Credit Mix (10%): Do you have a variety of credit types (credit cards, loans, etc.)?
- New Credit (10%): Have you opened a lot of new accounts recently?
Understanding these components helps you make informed decisions about building and maintaining your credit.
How to Start Building Credit at 18
1. Open a Student or Starter Credit Card
Many banks offer credit cards designed for young adults with little to no credit history. Look for:
- No annual fee
- Low credit limit
- Reporting to all three credit bureaus
Use the card sparingly and pay the balance in full each month.
2. Become an Authorized User
Ask a parent or guardian to add you as an authorized user on their credit card. If the primary user pays on time, that good history can appear on your credit report and boost your score.
3. Apply for a Secured Credit Card
If you can’t get approved for a traditional credit card, a secured card is a great alternative. You’ll provide a refundable deposit—typically \$200 to \$500—that serves as your credit limit. For example, if you put down \$300, your limit will be \$300. Because the bank holds the deposit as collateral, secured cards are easier to get even without a credit history.
Secured cards report your activity to the credit bureaus, so responsible use—charging small amounts and paying in full—builds your credit just like a regular card. Over time, if you demonstrate good credit behavior, many issuers may offer to upgrade you to an unsecured card and refund your deposit.
Tips for Using Secured Cards Wisely:
- Use it to pay for small, recurring expenses like Netflix or gas.
- Pay the full balance before the due date each month.
- Avoid maxing out the card—even with a low limit.
- Don’t cancel too soon; maintaining the account helps build history.
4. Open a Bank Account
While bank accounts don’t build credit directly, having a checking and savings account shows financial responsibility and can help you manage credit-related tasks more easily.
5. Use a Credit Builder Loan
Credit builder loans are designed to help you build or improve your credit. Here’s how they work:
- You apply for a loan—say $500 or $1,000.
- Instead of receiving the money upfront, the lender places it in a secure savings account.
- You make fixed monthly payments toward the loan over 6 to 24 months.
- Once you pay it off, you receive the full loan amount.
Because payments are reported to the credit bureaus, this builds your credit history. Many credit unions and community banks offer these loans, and some online lenders specialize in them.
Why Credit Builder Loans Work:
- They’re low-risk since the money is held until repayment.
- They help establish a positive payment history.
- They also help you build savings at the same time.
Pro Tip: Choose a credit builder loan that reports to all three credit bureaus and doesn’t charge high fees.
6. Monitor Your Credit
Start checking your credit reports and scores regularly. You can get a free credit report from each bureau once a year at AnnualCreditReport.com. Services like Credit Karma also provide free access to your scores and credit monitoring.
Best Practices for Building and Maintaining Good Credit
Pay Your Bills On Time
This is the most important thing you can do. Set reminders or automate payments to make sure you never miss a due date.
Keep Your Credit Utilization Low
Only use a small portion of your credit limit—ideally less than 30%. This shows lenders you can use credit responsibly.
Avoid Unnecessary Hard Inquiries
Every time you apply for credit, a hard inquiry is made. Too many hard inquiries in a short time can hurt your score.
Keep Old Accounts Open
The longer your credit history, the better. Even if you don’t use a card often, keeping it open can help your score.
Diversify Your Credit Types
Eventually, having a mix of credit types (credit card, car loan, student loan) can improve your credit profile.
Common Mistakes to Avoid
Missing Payments
Even one missed payment can damage your credit and stay on your report for years.
Maxing Out Credit Cards
Using your full credit limit makes you look risky to lenders. Try to keep usage below 30%, or even 10% if possible.
Applying for Too Many Credit Cards
Each application can temporarily lower your score. Apply only when necessary.
Closing Credit Accounts Too Soon
Closing an account can shorten your credit history and increase your utilization ratio, which can hurt your score.
Building Credit Without a Credit Card
Not everyone wants to start with a credit card, and that’s okay. Here are other ways to build credit:
Rent Reporting Services
Some services (like Experian Boost, RentTrack, or Esusu) allow you to report rent payments to the credit bureaus.
Utility and Phone Payments
Tools like Experian Boost let you add on-time utility and phone bill payments to your credit report.
Student Loans
If you have federal or private student loans, making payments on time builds credit. Even if they’re in deferment, know that future timely payments will count.
Tools and Resources
- AnnualCreditReport.com – Access your free credit reports
- Do It Yourseld Credit Repair
- Secured Credit Card Applications
- Credit Builder Accounts
Why Starting Early Pays Off
Building credit at 18 gives you a head start. By your early 20s, you could have several years of positive credit history. This opens the door to:
- Buying a car
- Renting an apartment
- Getting better insurance rates
- Qualifying for higher credit limits
- Saving thousands in interest on future loans
Most importantly, it sets you up with healthy financial habits that will benefit you for a lifetime.
Final Thoughts
Starting your credit journey at 18 is one of the smartest financial decisions you can make. While it takes time, consistency, and discipline, the benefits of a strong credit profile are enormous. Whether you choose a student credit card, become an authorized user, or take out a credit builder loan, the key is to be responsible and stay informed. Remember: building credit isn’t about how much money you have—it’s about how well you manage what you borrow.
Take control now, and your future self will thank you.
FAQs
1. Can I build credit if I don’t have a job?
Yes. You can still apply for secured credit cards or become an authorized user. Some cards consider other income sources like scholarships or allowances.
2. Will checking my credit hurt my score?
No. Checking your own credit is considered a “soft inquiry” and doesn’t affect your score.
3. How long does it take to build good credit?
With consistent on-time payments, you can build a solid credit score in 6–12 months.
4. Is it okay to have just one credit card?
Yes. One card is enough to start building credit. Over time, you may choose to open more.
5. What is a good credit score?
Generally, a score above 670 is considered good, while 740+ is very good to excellent.
By understanding the basics and staying on track, you can build a strong financial foundation that will serve you well for years to come.