Blog

How to Start Building Credit in High School

Posted by Alyssa Pascarella on Jul 19, 2019 10:33:00 AM

The credit conundrum when starting out:
  • You need good credit to borrow
  • You need to have borrowed to establish a credit history 
  • You cannot borrow before age 18
  • Your'e heading to college and need good credit to pay for tuition and other expenses

Which comes first, borrowing or good credit?

Having good credit is just as important to help ensure your stability and help you successfully do things such as rent an apartment, buy or lease a car, and even get a good job. Maintaining good credit is very important to your future and will afford you many opportunities that would otherwise be impossible. It can show stability, consistency, responsibility, and maturity – all of which are positive traits that can help you succeed in life. Below, are some helpful tips on building and managing a good credit profile.

iStock-535524316

 

Have your parent add you as an authorized user

If your parent(s) hold a credit card, ask them to make you an authorized user on the account, this is a great option if you are under the age of 18. As an authorized user, you can hold and/or use the adult’s credit card, but you won’t be the primary cardholder. This will help you build and improve your credit score, as long as the primary account holder continues to make on-time payments to the account. Do keep in mind, how you use the credit card could positively or negatively impact the credit score of you and your parent.

Get a secured credit card

This is a great way to start establishing credit if you are over the age of 18. Secured credit cards require you to leave a deposit with the issuer of your secured credit card. This deposit will dictate your line of credit, for example, if you leave a deposit of $500 your line of credit will be $500. At the end of the day, you're using your own money while learning credit card smarts and building credit. Even though your card is tied to hard cash, you still use it for purchases and make monthly payments, just like a normal credit card. Every time you make an on-time payment you are contributing to your credit history. These type of accounts are available at most local banks and credit unions.

Get a student credit card

Heading to college this fall, applying for a student credit card is another option for you. Student credit cards have more flexible qualification requirements, have low or no annual fees and often offer incentives for responsible behavior. Some cards will reward you with cash back, all incentives depend on the issuer of the credit card. If this is your first card and first pass at managing credit, a recommendation is to start with a low and manageable credit limit, such as $500. Credit card issuers may offer higher amounts, but it is always best to test the waters to be sure you can repay if you hit the spending limit.

Practice smart credit card habits

In order to make the most of your new credit card account, have it work to your advantage by paying off the entire balance each and every month. When you carry a balance, you pay unnecessary interest. A balance also shows that you are living above your means. Credit cards should be used for convenience and as a means not to carry large amounts of money. Although living frugally may not seem rewarding at first, it will no doubt benefit you in the long run. Be smart and if you cannot pay off the monthly balance, try to at least pay more than the minimum monthly payment. Worse case scenario, not paying on time can negatively impact your good name and possibly lower your credit score. Tip: 35% of an individual's credit score is derived from “on time payments,” so use this fact to your advantage.

The sooner you set out on your credit journey on the right path, the longer and more positive credit history you will have. Students in high school can build good credit like anyone else. Knowing your limits and paying on-time consistently will result in your credit score to climb in the right direction.

 

Learn more about becoming financially savvy by downloading the free Financial Aid 101 guide.

Financial Aid 101 Guide

Topics: College Planning, Financial Education for Students, Parents and College Planning, Money Management