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The Best Ways For Teenagers To Build Credit

There’s so much happening in your teens: From getting your driver’s license to working your first job to graduating high school. You’ve got a lot on your plate, and the last thing you’re probably thinking about is something like your credit score.

It’s definitely easier to leave stuff like credit to “future you,” but building credit now can help you get a car, pay for college and even buy a house someday.

In a Nutshell: How Teenagers Can Build Credit

It’s pretty hard to get through life without credit. Lenders, like banks, use your credit score to decide if they want to lend you money or not. So, a good credit score makes getting a loan a lot easier. Your credit will come into play in lots of other scenarios, too – renting your first apartment, getting a car loan, and even for utilities – so it’s worth building your credit now.

The easiest way to build credit is to already have it. What do you do if you don’t have any credit yet? (And it’s likely you don’t). Turns out, learning how to start building credit as a teenager isn’t that hard. Here are a few ways:

There are multiple options to build credit, even within the different types of credit accounts listed above. Even if you don’t have credit, you can probably find at least one option to help you start building your score. Read on to see the best ways for teenagers to build credit.

How to Start Building Credit as a Teenager

There’s no textbook to show you how to build a credit score as a teenager. Since everyone’s money situation is different, you’ll have to look at which option works best for you.

The good news is there are plenty of ways to build your credit score from the ground up.

Establish Good Money Habits

You’re not going to get, or keep, a good credit score if you can’t manage your money. Being a teenager can be hard for a lot of reasons. One bright spot, though, is that your teenage years offer you time and space to learn about money before all the responsibility of adult life falls on your shoulders.

Use your time now to establish good money habits. Those good money habits lead right into good credit habits.

Use Someone Else’s Good Credit

No, we don’t mean taking on someone’s identity. You can get some benefits from others who have good credit, like your parents or a relative, by being on an account with them.

There are two ways to do this:

Take Out a Secured Credit Card

A secured credit card is every bit a real credit card — except you need a cash deposit and it’s incredibly easy to get approved. Basically, a secured card works in four steps:

  1. You apply and hand over an agreed upon amount of money, which is called a cash deposit.
  2. The cash is put in a handing account, like a savings account. The amount you deposit usually becomes your credit limit, or the amount of money you can spend with the card.
  3. You receive your credit card and use it like normal. On-time payments help your credit score. Late or missed payments will likely hurt your score.
  4. After a certain time of on-time payments, you get your initial deposit back. You might also get approved for a regular credit card.

Approval rates are high because the credit card company can use your cash deposit to cover your purchases if you stop making payments. This is a bad idea, of course, because not making payments is probably going to wreck the credit you’ve built.

Apply for a Student Card

A lot of credit card companies have credit cards designed specifically for students. They often have low credit limits, but approval rates are higher than other types of credit cards. Unlike a secured card, a student credit card is a regular credit card and shouldn’t require a deposit.

You shouldn’t expect much for rewards, but a lot of student cards have some rewards or cash back system. That means you can earn a little back on the things you buy, so long as you pay off your bill.

Get a Credit-Building Loan

A credit builder loan is one of the best ways for teenagers to build credit. Unlike a car loan or student loan, you don’t get a lump sum from a credit builder loan. Instead, the money is held in an account until you pay off the loan amount. Credit builder loans work kind of like a reverse loan. You get the loan amount only after you’ve paid it in full over the loan term.

Be sure to look for a credit builder loan that doesn’t have interest or fees attached, like Kikoff. They offer a zero-interest, zero-fee loan that helps you build credit. That way, you’re not losing money while trying to build credit.

How to Build a Credit Score as a Teenager

No matter what your money situation looks like right now, there are things you can do to start building credit. There’s no one-size-fits-all, so consider the options above and think about what makes sense for you. As long start soon and make good money choices, you’ll set your future self up for success.