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How to build credit at 18

May 16, 2024 | 6 min read

In this article

  • Understanding Credit: Credit is the ability to access goods and services without using cash
  • Key Factors: Credit history, payment history, credit utilization, and length of credit history affect your creditworthiness
  • Building Credit at 18: Start by opening a checking account and then consider a secured credit card or a starter credit card, becoming an authorized user on a credit card or look into loans that can help build your credit.

Building good credit is one of the most important steps that you can take when you become an adult. A solid credit history and a high credit score can help you get the money that you need to buy a car, pay for school or move into your first home.

You’ve spent the last couple of years dreaming about going to college or starting a career, buying some wheels and maybe getting your own apartment. Now, the big day has finally come! You turned 18 and you’re ready to start all of that “adulting” stuff you’ve heard so much about.

There’s a good chance that you’ll need to take care of a few less-fun aspects of adulthood before you can enjoy some of the best perks — starting with building up your credit so you can actually get those fun perks. But what exactly is credit and how do you make sure that your credit is good? Before we talk about how to build credit at 18, let’s walk through some basics.

What to know about credit

Credit is how you’re able to get things without using cash. Whether you’re buying your morning latte with a credit card, getting a loan to buy a new vehicle or paying your tuition with student loan funds, you’re paying with credit. Basically, anytime someone – whether it’s your mom or a bank — loans you money, that’s credit.

When you hear people talk about “building” credit, they’re referring to your personal credit history and your credit score. These two things affect your ability to borrow money.

  • Credit history  refers to a detailed listing of money you’ve borrowed, from whom, and how well you did at paying it back. Lenders also look at:
    • Payment history: Do you always make payments on time, or are you sometimes late? Keeping up with your payments is one of the best ways to show lenders that you are responsible.
    • Credit utilization: A ratio that tells lenders how much of your available credit you are using. For example, if you have a credit card with a $500 limit and you charge a $100 purchase, you are using 20% of your available credit. Lenders typically like to see utilization ratios of 30% or lower.
    • Length of credit history: The longer you’ve had credit, the better — which is why building your credit early is so important.
  • Your credit score  is a three-digit number that gives lenders an overall picture of your creditworthiness at a glance. There are several types of credit scoring models, with FICO® and VantageScore being the most common. Both have score ranges of 300 to 850, with higher being better. There are also three main credit reporting bureaus: Experian, Equifax and TransUnion. These are the companies that keep track of your credit history and provide it to a lender when you apply for credit.

While mom might loan you money just because you’re her kid, lenders like banks and credit card companies need to know that you’ll pay them back. To determine whether they are willing to loan you the money, they will look at your credit report, which contains both your credit history and score.

Great! I’m ready for adulting now

Establishing good credit is a key part of adulthood that enables you to reach certain milestones and goals along the way, such as buying a car or house. First, the good news: No one has a credit score of zero, even if you’re just starting out. Instead, young adults and those with no credit history may not have a score at all.

To build credit before you’re 18, a parent or guardian would typically need to add you to a credit account or loan in their name. Some parents today opt to add their teenage children to a credit card account in case of emergency and/or to teach their kids how to use credit responsibly.

Once you turn 18, a wider range of options becomes available. As a legal adult, an 18-year-old can apply for a loan, open a credit card account, start new bank accounts, rent an apartment and much more on their own. Of course, that doesn’t mean every lender will approve you, especially without a solid credit score and history.

You’ll need to prove that you have income from a job or other source. Loans may require you to have a co-signer who will be responsible for paying back the loan should you fail to make payments. Apartment rentals and even utility companies may also ask for a co-applicant or references who can vouch for you.

Got it. So, how do I build credit at 18?

1. Open an account

If you already have a bank account, that’s a great first step. If not, open a checking account at your local bank or credit union. Just having a bank account won’t affect your credit but building a good relationship with your financial institution can help when it comes to borrowing. Use a debit card to make purchases when you can, and always make sure to maintain a positive balance to show your ability to responsibly manage an account.

Tip:  Some credit unions, like Desert Financial, offer free checking accounts so you won’t have to pay a monthly fee. That means you’ll keep more of your money!

2. Consider a starter credit card

Even if you already have a joint card with your parents, now could be the time to start building your credit solo. One option is to apply for a secured credit card. Secure credit cards require a cash deposit (say, $200 or $500) that the card issuer can use as a form of payment should you ever fall behind or stop making the agreed upon payments. Secured cards help you build credit with little to no risk of overspending. If you don’t have cash to put down up front, look for an unsecured credit card that’s specifically designed for young adults or students, such as the Visa® College Real Rewards Card from Desert Financial.

3. Be an authorized user

If you’re not quite ready to juggle the responsibilities of credit cards and loans yet, ask a parent or responsible relative to add you to their account as an authorized user. You’ll get the benefit of their payment history without the risk of missing payments yourself.

4. Look at student loans

Loans for educational expenses can help build your credit, whether you opt for federal loans through the U.S. Department of Education or private loans. Just remember that you’ll need to pay back these student loan funds later, with interest, so keep your budget and earning potential in mind.

5. Pay down balances quickly

Remember that part about credit utilization (the amount of available credit you’re using)? If you already have a $400 balance on your credit card with a $500 limit, you’re using up 80% of your available credit. Try to pay down high balances quickly so you don’t stay over that recommended 30% credit usage threshold.

6. Pay your bills on time (or early – gasp!)

This is the #1 most important thing you can do to maintain a good credit score. Your car and mortgage payments, credit cards, student loans and some rent payments are reported to the credit bureaus each month, and potential lenders want to see that these payments have been made on time. While things like utility and medical bills aren’t reported monthly, they may send your account to collections (debt collectors) if you fall too far behind – which could mean additional fees and a negative impact on your credit.

Now that you’ve turned 18, it’s important to lay a foundation for the goals and milestones you want to achieve as an adult. The path to those goals starts by building credit, which can help you achieve many of the larger financial goals you might have in mind, like buying a home or traveling with friends. By taking the necessary steps to start building positive credit and improving your credit score, you’ll be in a better position to pursue the kind of adult life you really want.

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