How to Build Credit at 18 (and Beyond) When You’re in College

7/19/24  | Kinsey Love, Digital Marketing Manager

 

Growing up and setting off on your own can be an exciting time. However, it’s crucial for college students—and all young people, really—to make good choices with their money and build healthy financial habits that can pay off throughout their lives.

A big part of adulthood is preparing for the future. This includes major events like finding a job, building a career, making major purchases, and all the things that “grown-ups” do. Your credit score can factor into all of these moments (yes, even finding a job in some cases).

Many young people, especially college students, may unfortunately slip into the pitfalls that come with getting into debt and suffering the consequences of poor credit. 

Now, building credit doesn’t just mean you should run out and apply for as many credit cards as possible. If not properly managed, that could cause extended financial hardship, especially if you fall behind on your payments. If you do choose to build your credit through credit cards, you should find the best beginner credit cards to establish good credit, avoid debt, budget expenses and build financial literacy. Take the time, do the research. You’ll be glad you did.

 

The Best Beginner Credit Cards: What to Look for

Choosing a credit card with Altabank leads you to three different options: the Maximum Rewards Visa® Signature Card, the Platinum Edition Visa® Card and the Secured Visa® Card.

For college students looking to apply for a credit card, the best fit may be the Secured Visa® Card, which is ideal for establishing or improving your credit score. With no annual fee and the ability to request your own credit limit, you’ll be in complete control of how much you want to spend with your credit card. 

It may be tempting to apply for the Maximum Rewards Visa® Signature Card or the Platinum Edition Visa Card. However, it’s not uncommon for first-time credit card users to quickly rack up a large balance with similar cards, only to see the balance grow to an untenable amount once the interest rate kicks in on the seventh cycle. You may be better off keeping a close eye on your balance so you’re not met with a burdensome surprise later.

Should you look for a beginner credit card elsewhere, keep the same criteria in mind. Consider finding one with the lowest spending limit and interest rate possible. Points and rewards are great, but cards offering those perks often come with annual fees and higher interest rates. 

And before you sign any credit card offers, make sure to read the fine print as well.

 

How Old Do You Have To Be To Get A Credit Card?

To have your own credit card, you generally need to be at least 18. It’s often joked that teenagers about to graduate from high school see a lot more mail headed their way, thanks to the wave of college/university pamphlets and offers from credit card companies.

While you can open a credit card account starting at age 18, you’ll have to provide proof of independent income or have a co-signer if you’re under 21. Even after you turn 21, you’ll still need to demonstrate your ability to make payments without a co-signer.

One credit-building tool some teenagers use is to become an authorized user on someone else’s credit card account, usually a parent or guardian. Of course, this should be done with caution and with a person you trust so you don’t end up on the hook for each other’s spending or possible failure to make payments.

 

Why Build Credit at Age 18, 19, 20, 21 or 22? 

Building credit as soon as possible can have ripple effects in years to come, especially as “adult” responsibilities add up after college. Where you live, what you do for work, and even what you pay for some of your more expensive monthly bills can be affected by the credit habits you form as a young adult.

First, your credit score impacts your terms on loans, mortgages and additional lines of credit. When it comes time to buy your first car or home, you will want the more favorable rates that come with a good credit score. 

A strong credit score can also factor into rental applications. In addition to proof of income, many landlords check credit reports. A good credit score can make it much easier to land the apartment you want. Insurance companies also use credit reports to determine auto and home insurance premiums. Better credit may lead to lower rates.

Not to mention, your credit may play a role in the job you land after college. Some employers run credit checks as part of the hiring process, especially if the job involves financial responsibilities. A good credit score—or a bad one, for that matter—can influence their decision to hire you.

Don’t fall into the trap of thinking you’ll just fix your credit score later while you miss payments or run a bloated balance on your credit cards. Start your credit journey on the right foot and you’ll reap the rewards throughout your adult life.

 

Good Credit vs. Bad Credit

Credit is monitored by three major bureaus; Equifax, Experian and TransUnion. The two most widely used credit scoring systems, FICO and VantageScore, evaluate your credit on a scale of 300 to 850, with the latter being the best possible score.

On this scale, a score of 700 or above is considered good, with a score of 800 or higher being excellent. Most consumers find themselves somewhere between 600 and 750. A score of 580 or lower is considered poor. Consumers in that range may have trouble obtaining credit and will face the highest interest rates.

But what goes into building good credit? What can impact a bad credit score?

There are five factors that contribute to building good credit, each with a different “weight” that affects your credit score. The most significant factor is your payment history, which is performed by consistently making on-time payments on your credit cards. Late payments can have a negative impact, so it’s important to stay informed on your payment due dates.

Other factors include credit utilization (the percent of your available credit that you use; the lower, the better), length of credit history, credit mix and new credit. Derogatory marks, such as high credit utilization, short credit history and frequent new credit applications can lower your credit score.

The best practices are simple enough: pay your bills on time and keep your balance low. Additionally, you should be mindful of new credit applications—don’t apply for the store credit card every time you check out at a department store at the mall—and monitor your credit report regularly. There are several free tools that can help you keep an eye on your credit score. For more tips about building good credit, check out "Tips for Building a Good Credit Score."

Now, all this may seem very “grown up” for college students and young adults, but the reality is that in the financial world, you are a grown-up. Getting a grip on your credit as early as possible will help you in a big way as you continue to move forward through adulthood.