4 Steps to Build Credit for Teens Right Now

It is never too early to have your teen start thinking about building their credit score. Having good credit can be the key to getting a car loan, credit card, or mortgage. Some employers will even check credit reports before offering a job to a candidate. But when you are just starting out, it gets tricky to build a good history when no one will give any credit.

Building credit doesn’t happen overnight, it takes time to establish. That’s why it’s important to start early so you don’t run into frustrating situations like being declined for an apartment. Starting at 18, your teen can start building their credit that will help them reach milestones later in life. Here are four ways your teen can build their credit:

1. Add your teen as an authorized user

Find out if your credit card issuer reports authorized user activity to the credit bureau. If so, consider adding them to your existing credit card account so they start to build credit from your payment history. Your teen doesn’t even have to use the card to earn this credit.

2. Co-sign for a loan or credit card

If your teen can’t be approved on their own, consider co-signing for a loan or credit card. Keep in mind that means you are on the hook if your teen doesn’t pay it back.

3. Get a starter credit card

Credit cards are among the best tools for building credit out there. Since its challenging to qualify for one without a history of credit, there are certain types for young people to look for.

  • Secured Credit Cards – These credit cards are just like any other credit card, except you have to put down a cash deposit. This amount becomes the credit limit on the card.
  • Unsecured or College Credit Cards – Websites like NerdWallet show you what type of credit score would be recommended to apply for a certain credit card. There are also student credit cards your teen can apply for once they’re enrolled at a university.

Whichever type of credit card they get, they should pay off their balance in full before the due date. This should be easy to do by setting up auto-pay.

4. Have them take out a loan

If your teen has a valid reason like they need a car, they may consider taking out a loan in their name. They will build their credit as they make their timely monthly payments, just like a credit card.

It’s important to discuss with your teen how credit works and credit management. Your teen should understand the basics like what factors influence their credit score. Understanding and establishing responsible behaviors will ensure your teen’s readiness for a future as a credit-worthy young adult.