The Right Age to Start Building Credit

Establishing good credit is central to reaching important financial milestones, such as buying a home or car. Credit can also affect employment, rent and insurance rates. A good credit score is not only the difference between being approved or declined for a loan but it also has a large impact on the rates you pay. In fact, maintaining good credit can save you tens of thousands of dollars during your lifetime. 

But when is the right time to start building credit? And what is the best way to start?

A U.S. News article recommends that people start building credit at age 18. According to Jade Beckman, vice president of consumer loans at Mountain America Credit Union, “Establishing credit at age 18 is a good recommendation. A person cannot legally contract for debt prior to this age. In fact, having credit established before 18 can trigger fraud alerts, as identity theft of minors is a leading strategy of fraudsters.” 

If you’re not sure where to start, you’re not alone. A recent survey on credit cards found that more than 40% of college-age respondents said their parents or teachers never educated them on how credit scores are calculated or how to use a credit card responsibly before getting one.

If you are eager to start building credit, begin with a checking account. While this doesn’t directly impact your credit score, it’s a good way to establish sound financial habits. Beckman points out, “A good credit score is a byproduct of good financial habits. Having an established checking account, regularly monitoring your spending activity, budgeting and staying within your means will reflect in how you build your credit score.”

While a credit card is an obvious way to start building credit, it’s important to start small. Get a low-rate credit card with a $1,000 spending limit, buy a car but only finance part of it, take out a loan with a co-signer. Basically, learn financial lessons with amounts that are manageable.

“The key to building a good credit profile is actually quite simple: don’t take on more debt than you can support, pay your debt on time, keep unsecured balances low and continually pay them off,” Beckman advised. “Credit comes down to being in control of your financial life, which translates to mundane but vital things like budgeting and delayed gratification.”