Good credit is a basic building block for many financial goals, from getting a car loan to qualifying for a mortgage. Although some tools for improving credit are only available to people over 18, there are steps you can take to begin building your credit. Here are some tips on how to build your credit in high school:
Check your credit score
Know where you're starting from by checking your credit score. Many banks now provide a free credit score to you as a service, but you're also by law allowed to ask for a free credit report every 12 months from each of the three main credit reporting agencies: Experian™, Equifax® and TransUnion®. The credit reporting agencies don't typically have minors' credit reports, but there may be some cases in which a minor does have a credit report. A minor may have a credit score if they were set as an authorized user or cosigner on a credit card or if they've been a victim of unauthorized or fraudulent activity.
Checking your credit score regularly also allows you to identify and flag cases of fraud and theft on your report. Children's social security numbers can be used by identity thieves to open credit accounts, which they then max out. And because children rarely check their credit scores, those accounts can sit for years accruing interest and penalties. Proactively checking your credit can help protect you and your credit rating before you even apply for your first card.
Checking your credit score tells you what you're working with and can highlight your strongest credit areas, as well as those which may need some work. If you're not sure how to access your credit score, you may be eligible use Chase Credit Journey® to receive a free credit score check.
Open a checking and savings account
You can open a checking account at 13 if your parents or guardians sign up as joint owners on the account. This is typically the case for people under the age of 18. Once you turn 18, you can get a checking and a savings account on your own.
Checking and savings accounts don't directly factor into your credit rating, but they're the foundation on which you build your finances and the first step toward building a history of paying bills on time. Being responsible for your bills is the biggest factor that impacts your credit score. With a checking and savings account you can deposit money and learn the basics about managing and growing your money, from earning interest to putting repeating bills on automatic payment.
Get a job
Credit card companies are legally obligated to ensure that you're able to repay your debt before they can issue you a card. Having a job will show lenders that you have money coming in, which can be used to pay bills and credit cards.
And be sure to save once you have a job. While you'll undoubtedly want to spend some of your hard-earned money, building your savings will help you develop long term-financial stability, by giving you the means to weather financial rough spots—and take advantage of investment opportunities when they come your way.
Ultimately, there is no "secret" to learning how to build credit at a young age. Getting your first job, keeping a budget and staying on track of any upcoming due dates on bills will help build your credit as long as your payments are made on time.
Become an authorized user on your parent's card
If you're 18, your parents can add you as an authorized user on their credit card, which can help you use their credit history to boost your own. You don't have to use the card, or even see it: their regular activity will help improve your credit. Keep in mind, though, that if your parent's credit score is poor, it can affect yours. And, if they miss a payment or run up a lot of charges, your score may also be affected.
Get a secured credit card
When you turn 18, you can apply for a credit card, but if you're just starting out, you might not have the credit score required to qualify for a traditional card. You could instead consider a secured credit card. These cards are designed specifically for people who are just starting out on their credit journey and haven't built up the kind of payment history you need to develop a strong credit score.
How secured credit cards work
A secured credit card is a type of credit card that requires a security deposit paid by the cardholder in advance. The amount of the security deposit typically serves as the credit limit. So, if you provide a $500 in your secured credit card account, you'll likely have a $500 credit limit. It's important to review the terms that come with that card, such as fees, interest rates, and the security deposit.
Many banks regularly report activity on a secured card to the three major credit reporting agencies. So, by using your secured credit card, you can build up a history of being a responsible user of credit. Whether you can make consistent on-time payments is one of the factors considered by lenders when they review your applications.