How to Start Building Credit at Age 18


Entering adulthood is an exciting time, filled with newfound responsibilities and opportunities. One critical aspect of adult life is managing your finances, and a big part of that is building a solid credit history.

young woman building credit

A good credit score can open doors to better financial opportunities, making it essential to start building credit at age 18. This article will guide you through the process, offering practical advice and actionable steps to help you build a strong credit foundation.

Key Takeaways

  • For young adults beginning to build credit, consider using secured credit cards, becoming an authorized user on a trusted individual’s account, and looking into credit-builder loans. These steps help establish a solid credit foundation.
  • Responsible habits like making timely payments, maintaining low balances, and limiting new credit applications are key. Keep an eye on your credit score and report to address potential errors quickly.
  • Improve your credit history through consistent student loan payments and rent reporting services, which can boost your credit profile if rent payments are regularly tracked and add to your credit reports.

The Basics of Credit

To effectively understand and manage credit, it’s vital to start with the basics. Your credit score, an essential three-digit indicator, is calculated from your credit history and signals your trustworthiness to lenders.

Components of a Credit Score

  • Payment history – Your history of paying bills on time is the most critical factor affecting your credit score.
  • Amounts owed – This refers to the total amount of debt you have compared to your available credit limits.
  • Length of credit history – A longer credit history is generally better, as it demonstrates a track record of responsible credit use.
  • Credit mix – Having a diverse mix of credit, such as installment loans and revolving credit, can positively impact your score.
  • New credit inquiries – Applying for multiple credit accounts in a short period can negatively affect your credit score.

Benefits of Having a Good Credit Score

A good credit score can lead to:

  1. Lower interest rates on loans and credit cards
  2. Easier approval for rental applications and utilities
  3. Better insurance rates
  4. Improved employment opportunities

How to Access Your Credit Report

By law, you’re entitled to one free credit report every 12 months from each of the three major credit bureaus: Equifax, Experian, and TransUnion. To access your reports, visit

Review Your Credit Report for Accuracy

Ensure your credit report is accurate by checking for:

  1. Personal information
  2. Account details
  3. Payment history
  4. Credit inquiries

Dispute Errors on Your Credit Report

If you find errors on your credit report, it’s essential to take action to correct them, as inaccuracies can negatively impact your credit score. Each credit bureau has a specific dispute process that you should follow to ensure the errors are rectified.

Establish Credit with a Secured Credit Card

A secured credit card is a type of credit card specifically designed for individuals looking to build credit. Unlike traditional unsecured credit cards, a secured credit card is backed by a cash deposit, which serves as collateral. This security deposit acts as a safety net for the credit card issuer, reducing their risk in case the cardholder defaults on their payments.

The deposit amount typically determines your credit limit, which is usually equal to or a percentage of the deposited amount. For example, if you provide a $500 deposit, your credit limit may be set at $500 or slightly less, depending on the issuer’s policies. As you use the card and make on-time payments, your credit activity is reported to the credit bureaus, helping you build your credit history.

Secured credit cards function similarly to unsecured cards in terms of making purchases and paying interest on outstanding balances. However, if you fail to make payments or default on your account, the credit card company can use the security deposit to cover the unpaid balance.

Once you have demonstrated responsible credit use over time, many secured card issuers offer the option to upgrade to a traditional credit card and return your deposit. This transition allows you to continue to build credit without the need for collateral and may come with additional benefits like higher credit limits and rewards programs.

How to Choose the Best Secured Credit Card

Look for a card with:

  1. Low fees
  2. A reasonable interest rate
  3. The option to graduate to an unsecured card
  4. Reporting to all three credit bureaus

Here’s a list of the best secured cards for 2024.

Tips for Using a Secured Credit Card Responsibly

  1. Make all payments on time
  2. Keep your balance low
  3. Regularly review your credit report

Become an Authorized User

Becoming an authorized user means you are granted permission to use someone else’s credit card account, typically a family member or close friend with a good credit history. The primary account holder adds you to their account, and you receive a credit card linked to that account with your name on it.

As an authorized user, you can make purchases and enjoy the convenience of using a credit card, but you are not legally responsible for the debt incurred. The primary account holder is still responsible for making payments and managing the overall account.

The key benefit of being an authorized user is that the account activity, including the positive payment history and credit utilization, is reported to the credit bureaus under your name. If the primary account holder has good credit and maintains responsible credit habits, this can help you establish a positive credit history and potentially boost your credit score.

However, it’s essential to remember that if the primary account holder fails to make timely payments or carries high balances, it can negatively impact your credit as well. So, you need to choose someone with a strong credit history and trust that they will continue to manage the account responsibly.

Benefits of Being an Authorized User

  1. Establishing credit history
  2. Learning responsible credit habits
  3. Potentially boosting your credit score

How to Find a Responsible Primary Account Holder

Choose someone with a good credit history, low credit utilization, and a history of on-time payments. This is important because their credit habits will directly impact your credit score as an authorized user.

Apply for a Credit-Builder Loan

A credit-builder loan is a unique type of loan designed specifically to help individuals build credit history. It serves as a financial tool for those with no credit history or those looking to rebuild their credit after past financial mistakes. Unlike traditional loans, where you receive the borrowed funds upfront, a credit-builder loan works differently.

When you are approved for a credit-builder loan, the lender places the loan amount in a secured account, such as a savings account or a certificate of deposit (CD). You do not have immediate access to these funds. Instead, you make monthly payments, including principal and interest, until the loan is paid off. The lender reports your positive payment history to the three major credit bureaus, which helps you build credit and improve your credit score.

Upon successfully repaying the loan, the lender releases the funds in the secured account to you, minus any fees and interest. Essentially, you are saving money while simultaneously building your credit history.

Credit-builder loans are typically offered by credit unions, community banks, and online lenders. As you shop for credit-builder loans, it’s essential to compare interest rates, fees, and terms.

Here’s a list of the best credit-builder loans for 2024.

Develop Responsible Credit Habits

Building good credit requires consistent and responsible financial behavior. By developing responsible credit habits, you can improve your credit score and open up better financial opportunities. Here are some key practices to adopt:

Making Timely Payments

Paying your bills on time is so important for building and maintaining good credit. Set up payment reminders or autopay to ensure you never miss a due date.

Maintaining Low Credit Utilization

Keep your credit card balances low by using only a small portion of your available credit. A credit utilization ratio below 30% is ideal.

Limiting Credit Applications

Applying for multiple credit accounts in a short period can harm your credit score. Only apply for new credit when necessary.

Monitoring Your Credit Score Regularly

Regularly check your credit score to track your progress and identify any issues that need to be addressed.

Creating a Budget and Financial Plan

Develop a budget to track your income and expenses, and create a financial plan to help you achieve your goals.

Graduating to an Unsecured Credit Card

If you’re wondering how to determine if you’re ready for an unsecured card, there are a few key factors to consider. First, it’s important to have a history of on-time payments.

Demonstrating that you can manage your financial obligations responsibly will make you a more attractive candidate to potential lenders. Additionally, maintaining low credit utilization and a stable income are essential indicators that you’re prepared for this next step in your financial journey.

Factors to Consider When Choosing an Unsecured Credit Card

When it comes to choosing a credit card, there are several factors you should consider. Annual fees, for instance, can vary greatly between different cards, so be sure to weigh the costs against the benefits.

Similarly, interest rates can have a significant impact on your overall financial health, making it essential to find a card with a competitive rate. Furthermore, consider the rewards programs and card benefits offered, as these can provide valuable perks and savings opportunities.

Tips for Managing a Credit Card Responsibly

Managing your credit card responsibly is essential to maintaining good credit and avoiding debt. To do so, continue making timely payments and keep your credit utilization low, as these habits will contribute to a strong credit score.

Additionally, it’s important to monitor your credit report and score regularly to ensure your financial profile remains in good standing. Lastly, avoid overspending by setting a budget and sticking to it, which will help you maintain control over your finances and prevent unnecessary debt accumulation.

The Role of Student Loans in Building Credit

Student loans are often one of the first forms of debt that young adults encounter. When managed effectively, they can help establish a solid credit foundation for the borrower. On-time payments are imperative, as payment history accounts for a large portion of an individual’s credit score.

By consistently making payments on your student loan debt, you demonstrate to future lenders your ability to manage debt and honor financial commitments. This, in turn, can make it easier to obtain other forms of credit, such as credit cards or auto loans, as lenders will view you as a responsible borrower.

Managing Student Loans Responsibly

  1. Understand your student loan terms and repayment options
  2. Create a repayment plan that fits your budget
  3. Consider setting up automatic payments
  4. Communicate with your loan servicer if you experience financial hardship

Use Rent Reporting Services

Some landlords and property management companies report rent payments to credit bureaus. If yours does, making on-time rent payments can help build credit history.

If your landlord doesn’t report rent payments, you can use a rent reporting service to have your rent payments reported. Research the available services to find one that best fits your needs.


Starting to build credit at 18 is an important step towards future financial success. By learning the basics of credit and practicing responsible financial habits, you can create a solid foundation that will benefit you throughout your life.

Stay patient and consistent as you work on your credit. Make timely payments, keep your credit utilization low, and regularly check your credit report. With dedication and smart financial choices, you will be well on your way to achieving your financial goals.

Meet the author

Crediful is your go-to destination for all things related to personal finance. We're dedicated to helping you achieve financial freedom and make informed financial decisions. Our team of financial experts and enthusiasts brings you articles and resources on topics like budgeting, credit, saving, investing, and more.