The best way to build credit at 18 is to get a credit card in your name and use it responsibly. All major credit cards report account information to the credit bureaus each month, allowing you to build credit history. As long as the information shows on-time payments and reasonable credit utilization, that credit history will be positive and you’ll be on your way to building a good credit score.
There are two ways to get a credit card at 18: as an authorized user or by applying for your own account. If you have enough independent income to afford monthly bill payments, you can get your own credit card account when you turn 18. The best type of credit card to get at 18 is a student credit card, assuming you’re in college. Credit cards for students tend to have better rewards as well as lower rates and fees than other starter credit cards for people with no credit.
But any type of card will do, provided it has a low annual fee and you use it right. To help you with that, we’ll lay out the recipe for building credit at 18 below.
Here’s How to Build Credit at 18 Years Old:
- Become an authorized user on a family member’s credit card.
- Apply for a starter credit card.
- Set up automatic payments from a bank account for your starter card.
- Make sure your card’s monthly statement balance is much lower than the credit limit.
- Work toward a high-paying job.
- Save as much as possible and minimize debt.
- Monitor your credit and make adjustments when needed.
Using a credit card isn’t the only way to build credit at 18. One alternative is taking out a credit-builder loan, which is essentially a loan that holds the borrowed money in a bank account while you make payments. This allows you to build credit easily, and doesn’t require a good credit score. Once you’ve made all of the payments, the money is released to you. Credit builder loans are typically small (think around $1,000) and have short repayment times, usually just a year, so their sole intent is to help you build your credit.
Financing a car using an auto loan can also help you build credit. Just like any other loan, payments you make are reported to the credit bureaus. Getting an auto loan can also help your credit because a portion of your score is determined by your “credit mix,” so having an installment loan adds variety even once you have a credit card.
You can also arrange to have apartment rental payments reported to the credit bureaus. Some landlords report monthly rental payments to the credit bureaus automatically, but not all do. If your landlord doesn’t, you can still have your rental payments reported through a third-party service. Some of the top ones are RentTrack, eRentPayment, and Cozy. Paying rent is something you’d have to do each month anyway, so you might as well use it to build your credit, too.
Still, getting a starter credit card and/or becoming an authorized user on a family member’s or friend’s account is the best approach. Just remember that having your own account requires more responsibility, as you’ll be the one who has to pay the bills. If you don’t, your credit score will suffer. As an authorized user, bill payments are the primary accountholder’s responsibility. Because of that, authorized users can file a dispute with the credit bureaus to get negative information removed from their credit reports.
You can keep track of what’s on your TransUnion credit report and check your latest credit score for free on WalletHub. You’ll get personalized tips for how to build credit most efficiently, too.
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