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How to Help Teenagers Establish Credit Before Turning 18

Published March 6, 2024
6 min read

Key points about: Building credit before eighteen

  1. Having a strong credit score is crucial for securing future loans and housing.

  2. Teens under 18 can still take steps to start building credit for a strong start once they reach this milestone.

  3. Parents and guardians play a vital role in shaping their teens’ financial literacy through education, guidance, and monitoring their children’s credit reports.

By building their credit, teenagers have a better chance of securing a loan or renting their first apartment. Can you build credit before 18? If not, at what age can you start building credit? The following guide will help you learn how to build credit as a teenager.

Understanding credit basics for teens

Teenagers aged 16 and 17 can begin their credit-building journey by understanding the basics. Before diving in, it's important to grasp concepts like credit scores, interest rates, how much credit you use, and your payment history. With these insights, you’re more likely to set yourself to make smart financial choices as you build credit.

What makes up a credit score?

To learn how to build credit as a teenager, you’ll need to learn more about how credit scores work. Your credit score is composed of five factors:

  • Payment history (35% of your score): This is the most significant factor. It reflects your past behavior in repaying your debts. Paying your bills on time may help build your credit. Late payments, defaults, and bankruptcies negatively impact your score.
  • Credit utilization ratio (30% of your score): This refers to the percentage of available credit you’re using. High utilization—typically more than 30% of your credit card balance—may reduce your credit score. If your limit is $1,000, consider keeping your balance below $300.
  • Length of credit history (15% of your score): This refers to both your oldest credit account and the average age of all your accounts. Opening a credit account early may help you build credit over the years. A longer credit history generally improves your score.
  • Credit mix (10%): Multiple credit types may boost your credit score. Credit cards, student loans, and car loans can be great ways to improve your credit mix.
  • Credit inquiries (10%): Hard credit inquiries may lower your score. Opening many new credit accounts in a short time can indicate higher risk, thus lowering your score.

What’s the meaning of a credit score? The factors above tell lenders how well you’ve handled your money in the past, which indicates your future creditworthiness.

Strategies to begin building credit before eighteen years old

Can you build credit before 18 you turn years old? Absolutely. A solid credit foundation from a young age can provide significant advantages, especially when it comes to any financial responsibilities. If you're thinking about building credit while you're still a teenager, there are ways to do it. These methods will help you create a strong credit record, which may make it easier for you to manage your money well in the future.

Establish employment history

Can you build credit before 18 without a credit card? In a way, yes—by getting a job. Even though having a job doesn't directly build credit, it does show that you may be more responsible with money. So, your work history at 16 or 17 can be a good start in showing that you can handle financial responsibilities.

Credit issuers often consider steady income an indicator of a borrower's ability to repay debt. This is a requirement of the Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit CARD Act).

Open a checking or savings account

Consider opening a checking account and savings account with a parent or guardian. While it won't directly impact your credit score, managing the account responsibly can help you learn about handling money in the real world. These accounts teach you important money management skills from an early age.

By keeping an eye on your account balances, you can avoid fees for spending more than you have. This not only saves you money but also helps you learn to be responsible with your finances. Learning how to manage money firsthand sets a strong foundation for understanding credit and how it impacts your financial future.

Become an authorized user

You can also build credit by asking your parent or guardian to add you to their credit account where Authorized User can build a credit history, with responsible use.2 This means you can use their credit card, which may help you build your own credit foundation.

However, there are some risks to consider. If the person who owns the card doesn't pay on time or spends too much, it could hurt both of your credit scores. It's important to talk with your parent or guardian about how to use the card properly and to be cautious about any potential misuse.

As a teen, taking steps toward building your credit is a great start on the path to financial independence. However, the journey is a team effort.

Parents: Your role in helping your child build credit

Now, let's turn the spotlight to the parents and guardians. You have a big part to play. Your help and advice are important. You can play a key role in guiding your teen to be responsible with their money and credit. 

Teaching your child to be smart with money can also help them build good credit later on. By involving your teen in daily financial decisions—like budgeting for groceries and understanding the value of comparing prices—you're laying the groundwork for strong financial habits. These practices help them understand the value of money and also prepare them for responsible credit use. Leading by example, you can show your child what is needed for a positive credit history.

Both teens and parents should grasp the importance of credit management, including how to handle credit balances and the impact of late payments. It's okay if these concepts seem complicated; many adults find them challenging. You don't need personal stories of financial mishaps to teach these lessons. Instead, you can start with the basics: what credit is, why it's important to pay bills on time, and how interest works on credit cards. Exploring these topics together can be a learning opportunity for both of you. Read our Guide to Personal Finance for Teens with your child to learn more.

Parents: How to monitor and protect your child's credit

Teens can start building credit before turning 18. This early start means it's important for you as a parent to be proactive about safeguarding your teen's financial future. Regularly checking your teen's credit report is a key step in spotting any unusual activity or errors early on. Also, educating yourself and your teen on the risks of identity theft and ways to prevent it is essential. This knowledge arms your family against potential financial threats, ensuring your teen's credit-building efforts are secure.

Did you know?

A child’s identity may be more valuable to identity thieves because parents often don’t monitor their children’s credit reports or think accounts will be opened in their names. Your identity protection monitoring services may extend monitoring and assistance services to your children. Before signing up for an identity theft protection service, review the company’s offerings to see what’s included and how much a subscription costs. You can compare Discover Identity Theft Protection to Lifelock.

Parents: Checking credit reports for minors

To obtain a credit report for a minor, begin by contacting the three major credit bureaus online or by mail. Next, you'll provide identifying information about your child to determine whether a credit report exists. You'll also need to provide your own information and identification. Once your request is processed, you'll get a report indicating whether there is any credit history connected to your child's Social Security Number. If no report is generated, this generally means there hasn't been any fraudulent activity or credit accounts opened in their name.

Building credit early matters

Earning, saving, investing, and spending smartly as a teen sets you up for solid financial habits in the future. While teens will have an official credit score once they turn 18, you can help them build their scores and develop financial literacy by sharing real-world examples and experiences. When you're faced with life's larger financial responsibilities, making these smart decisions early on may pay off.

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  1. Build/Rebuild Credit with responsible use: Discover reports your credit history to the three major credit bureaus so it can help build/rebuild your credit if used responsibly. Late payments, delinquencies or other derogatory activity with your credit card accounts and loans may adversely impact your ability to build/rebuild credit.
  2. Authorized User Building Credit Claim - New Variations & Updated Disclosure: *Primary account holder is responsible for all charges made by the Authorized User(s) Discover reports the account credit history to the three major credit bureaus as to you and the Authorized User. This can help build the Authorized User’s credit history over time if used responsibly. Late payments, delinquencies or other derogatory activity with your credit card accounts and loans may adversely impact yours and the Authorized User’s ability to build credit.