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How to start building credit at age 18

Building credit at 18 is an essential part of adulthood. These seven tips will guide you through how to start building credit at 18. 

1. Understand the basics of credit 

Before you do anything else, you should understand the basics of how credit works. 

Your credit report is maintained by the three major credit reporting bureaus: Experian®, Equifax® and TransUnion®. Each bureau may generate separate reports. What's contained in that report determines your credit score. This is calculated using credit score models like VantageScore 3.0®, which is available in Chase Credit Journey, and FICO®

The six key factors that make up your VantageScore 3.0® credit score are:

  • Payment history 
  • Credit history 
  • Credit usage 
  • Total balances 
  • Recent credit 
  • Available credit

The five key factors that make up your FICO® credit score are: 

  • Payment history 
  • Credit utilization 
  • Length of credit history 
  • New credit 
  • Credit mix

Depending on your future behavior, all of the above can affect your credit score. 

The major credit reporting bureaus are required to supply you with your free credit report once a year. Future lenders will use your credit report and score to determine your interest rate on both credit cards and loans. A good score will likely land you a lower interest rate while a poor score will likely mean a higher interest rate.

2. Become an authorized user 

Do you have a family member or friend who has a strong credit score and is willing to add you as an authorized user? An authorized user is someone that's permitted to use another person's credit card. This can help you start to build credit activity. 

Even if your card is dormant, their activity — assuming in good standing — could benefit your credit score. If you or the primary cardmember rack up too much debt, you could both be negatively impacted. 

Before becoming an authorized user, make sure that the credit card company reports activity for authorized users. Otherwise, you won't build your credit. 

3. Get a starter credit card 

Credit cards are a great tool to start building credit. If you don't have a credit history, you may have trouble qualifying for certain cards. If you're a student, consider a student credit card. 

You can also establish a credit history with a secured credit card . A secured credit card requires a security deposit or collateral. The cash deposit — typically $200-$500 — becomes your credit line. Secured credit cards aren't offered by Chase, but it's similar to a traditional credit card. They charge late fees in cases of missed payments and may have high interest rates as well as annual fees. 

4. Build credit by making payments on time 

Payment history is a very important factor in your credit score, so making payments on time is one of the best things you can do to build credit. 

Making timely payments goes beyond your credit card balance. You want to make timely payments on all your bills — car loans, student loans etc. — to establish good credit. Late or missed payments can take a toll on your credit score. 

One way to make sure you don't miss a payment is to enroll in autopay

5. Keep your balance low 

An important factor in your credit score is your credit utilization ratio. Your credit utilization ratio, or the amount you owe compared with your credit limit, makes up a portion of your credit score. 

Experts suggest keeping your credit utilization ratio below 30 percent. Generally, you should try to keep that figure much lower, closer to 10 percent. 

The best thing to do is completely pay off your balance each month. This way you'll avoid paying interest and keep your utilization down. 

6. Take out a student loan 

Taking out a loan for the sole purpose of building credit can be beneficial. While Chase doesn't offer student loans, this type of loan may be needed to help you pay for college

All types of student loans — federal, private and refinance — will show up on your credit report. Loans will start counting toward your credit score when you start making payments. 

7. Keep tabs on your credit report and score 

Once you start building credit, you need to make sure everything is in order. You can access your credit score for free by using Chase Credit Journey. Make sure there are no inaccuracies. If you see an error, report the mistake to the major credit reporting bureaus.

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