Introduction
Having good credit is essential for any adult in today’s world. It can help you secure loans for big purchases like a car or house, get better interest rates on those loans, and even land a job. But what happens if you don’t have any credit? How do you start building it?
To start building credit, it’s important to understand what credit actually is and how it works. Credit is essentially a numerical representation of your ability to pay back debts. The higher the number, the better your credit score is. In the United States, this score is determined by three major credit bureaus – Experian, Equifax, and TransUnion – who collect information about your financial history. This information includes things like payment history, the amount of debt you’re carrying, and how long you’ve been using credit.
Unfortunately, if you’re 17, you likely won’t have any of this information because you haven’t had the time to build it yet. That’s why it’s important to start building your credit as early as possible. Here are seven tips for building credit at 17.
Open a Secured Credit Card that Reports to the Credit Bureaus
One of the best ways to start building credit at 17 is to open a secured credit card. A secured credit card requires a cash deposit that acts as collateral in case the cardholder defaults on payments. This makes it a great option for those with limited or no credit history because it reduces the risk for lenders.
What’s more, many secured cards report activity to the three major credit bureaus, which means that responsible use of a secured credit card can help you build a positive credit history. To find the right card for you, make sure to read the fine print and look for one with low fees and a high credit limit.
Become an Authorized User on a Parent’s Credit Card
Another way to start building credit at 17 is to become an authorized user on a parent’s credit card. As an authorized user, you’ll be able to use the card for purchases but won’t be liable for any of the charges. Your parent, however, will still be responsible for paying off the balance.
The benefit of this is that the credit activity on the account will show up on your credit report, helping you to build credit over time. This can be especially beneficial if your parent has a long history of making on-time payments and keeping low balances. Just keep in mind that if they miss payments or carry a high balance, it could hurt your credit.
Pay All Bills on Time
Paying bills on time is one of the best ways to build a positive credit history. According to a recent study by Experian, “35% of a person’s credit score is based on payment history, making it the most influential factor in determining a person’s creditworthiness.”
When it comes to paying bills, the key is to develop good habits early. Set up reminders for yourself, create a budget, and track your spending. By doing these things, you’ll be better equipped to stay on top of your payments and avoid late fees.
Take Out a Student Loan
If you’re planning to attend college, taking out a student loan can be a great way to start building credit. Student loans are typically offered at lower interest rates than other types of loans, and repayment plans can be tailored to fit your budget. As long as you make your payments on time, your credit score should begin to improve.
It’s important to note that not all student loans are reported to the credit bureaus. Before taking out a loan, make sure to check with the lender to see if they report to the credit bureaus. If they don’t, you may want to consider other options.
Sign Up for a Small Installment Loan
An installment loan is a type of loan that requires the borrower to make regular payments over a set period of time. These types of loans can be used for a variety of purposes, such as buying a car or consolidating debt.
Because installment loans require regular payments, they can be a great way to build credit. Just make sure to shop around and compare rates before signing up. And, as always, be sure to make your payments on time.
Get a Job and Apply for a Store Credit Card
Getting a job and applying for a store credit card can also be a great way to start building credit. Store credit cards usually have lower credit limits and higher interest rates than traditional credit cards, but they can still help you build a positive credit history.
Before applying for a store credit card, make sure to read the terms and conditions carefully. Look for a card with a low APR and no annual fee. Also, make sure to pay off your balance in full each month to avoid interest charges.
Conclusion
Building credit can seem daunting, especially if you’re just starting out. Fortunately, there are several steps you can take to start building credit at 17. Opening a secured credit card, becoming an authorized user on a parent’s credit card, taking out a student loan, and signing up for a small installment loan are all great ways to start building credit. Additionally, paying all bills on time and getting a job and applying for a store credit card can help too. With patience and discipline, you can establish a strong credit history that will serve you well into adulthood.
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