How to Build Credit as a Teenager

What if you could build a better tomorrow for yourself, starting today?

Your credit score will determine much in life, including how easily you can buy a car or even whether the dealership will finance you or not. Down the line, your credit score can determine so much else, including your ability to buy a home. That means there is no time like the present to take control of your financial future.

Unfortunately, most young people don’t know how to build credit as a teenager. The best-case scenario for these teens is that their credit will only be slightly poor when they really need it. In the worst case, teens may fall into the trap of spending more than they have, ruining their credit score in a way that will take many years to undo.

Fortunately, that door swings both ways: By learning how to build credit as a teenager now, you can put yourself into a far better financial position than your peers. And it’s easier than you might think. In fact, by taking a few easy steps today, you can start building the kind of future life you deserve.

Ready to start building that future right now? Keep reading to learn the best ways to build your credit score as a teenager!

Main Takeaways

• Making payments on time is the best way to build credit.
• Free financial literacy courses can help set you on the right path.
• Secured credit cards and other special cards can improve credit.
• It’s important to sign up for a free credit monitoring service.
• Never use credit to buy things you know you can’t afford.

Table of Contents

• What Factors Impact Your Credit Score?
• Tips for Building Credit as a Teen
• What’s a Good Credit Score to Aim For?
• What Can Hurt Your Credit Score?
• How to Repair a Poor Credit Score
• Build Good Habits With Everfi’s Financial Literacy Course

What Factors Impact Your Credit Score?

Several factors impact your credit score, including the following. Each one is worth a different percentage in determining your FICO credit score, which a whopping 90% of lenders use to determine your credit quality and eligibility.

• 35% — Payment history: Always make those payments on time!
• 30% — How much you owe: Also known as credit utilization, this means the more credit you’ve used in relation to how much credit you have, the lower your score may be.
• 15% — Length of credit history: Try to hold onto your oldest cards even if you aren’t using them for purchases.
• 10% — Credit mix: Credit agencies typically favor a mixture of things like student loans, car loans, and/or mortgages as well as credit cards and lines of credit.
• 10% — New credit: Taking out new credit can actually lower your score … one more reason to hold onto those old cards!

Tips for Building Credit as a Teen

Some teenagers and even their parents worry that it may be difficult to build credit as a young person. However, that’s not the case, and when you know the best steps to take, building solid credit as a teen is easier than you ever imagined.

Below, you’ll find the top tips for boosting your credit score. With so many tips to choose from, it should be easy to take control of your credit score before your finances take control of you!

1. Get a Secured Credit Card

Secured credit cards must be “secured” by a deposit, and that deposit becomes the credit limit for the card. Such a card allows you to start building credit right away, without the chance of landing you thousands of dollars in debt. And every on-time payment you make helps build your credit.

2. Take Out a Credit Builder Loan

Many banks and credit unions offer small loans specifically designed to help you build credit. Such loans are ones that you pay each month until the money is fully available to spend. That may sound a little backward, but once again, each on-time payment helps build credit.

3. Become an Authorized User on a Parent’s Credit Card

Instead of (or in addition to) getting your own credit card, you can become a joint user on a parent’s card. Even if you never personally make purchases with it, this helps you passively build credit. Don’t forget, though, that you are both responsible for the debt, so you and your parent must trust each other quite a bit for this to work!

4. Make Payments on a Student Loan

Are you a college student with loans? Each on-time payment you make helps build credit. Because of this, even students with full-ride scholarships might consider taking out small loans to pay for textbooks and build up their credit scores.

5. Get a Gas Credit Card

It’s an open secret that gas is getting more and more expensive. Many companies offer special gas credit cards that will give you a small discount at the pump. And making payments on-time each month is an easy way to build your credit up.

6. Monitor Credit Reports

Most people have no idea what has caused their credit to improve or degrade. Signing up for a free credit monitoring service can help you identify what is helping or hurting your score, and most services will offer concrete steps to build your credit higher. As an added bonus, they can help you identify and address any fraud that may be dragging your score down.

7. Open a Joint Credit Card or Loan With a Parent or Guardian

Just as you can become an authorized user on one of your parent or guardian’s existing credit cards, they can become cosigners on a new card or loan for you. This establishes a credit history and lets you build your score up by making payments on time.

8. Get a Student Credit Card

For high school and college students, it’s possible to obtain special student credit cards. These cards are designed specifically to help students build credit. And they help you master financial skills that will help you well into adulthood.

9. Maintain Good Financial Habits

Speaking of financial skills, it’s good to practice solid money habits from a young age. Make all payments on time, and try to save money whenever possible. Never use credit to buy something too expensive for you to afford, and make more than the minimum payments whenever possible to avoid ending up with major debt.

10. Become a Co-Signer on a Loan or Credit Card

Earlier, I touched on getting your parents to co-sign loans or credit cards with you. It is also possible for you to co-sign on loans and cards with other parties. This can help you build credit, but keep in mind that most of the major credit companies no longer allow for co-signers on accounts.

11. Use a Rent Reporting Service

Once you move out of your parent’s house, your most regular payment will be your monthly rent. By signing up for a rent reporting service, you can have each of these on-time payments count toward your credit. After you sign up, this helps you passively build your credit by doing something you’d be doing anyway: paying rent!

12. Pay Cell Phone and Utility Bills on Time

You’ve probably noticed a theme here: Paying for things on time helps your credit, and making late payments (or missing them altogether) hurts your credit. If you’re looking for how to build credit as a teenager, you can start by paying your cell phone and utility bills on time. You’ll get a better score and won’t get dragged down by annoying late fees.

13. Use Education-Focused Financial Products

As a young person, you’re still learning about many things, including building credit. Remember, you can use education-focused financial products to help build your score and improve your overall financial well-being. This includes the free financial education for K-12 students course offered by Everfi.

What’s a Good Credit Score to Aim For?

Everybody wants a good credit score, but ironically enough, most don’t know what “good” even means in this context. What is a realistically good score for teens to aim for, and how can they realistically expect it to increase over time?

Generally speaking, everything below a 630 credit score is “bad.” A score of 630–689 is considered “fair.” Good scores fall in the 690–719 range, while excellent credit scores range from 720–850.

Based on that, you might think you should aim for at least a “good” score. While that should always be your goal, it can often be difficult for teens to get higher than the fair credit range due to a number of factors. This includes having young credit, very little credit, and a low mix of credit.

The good news is that, as long as you make your payments on time and don’t take out too many accounts, you should hit the good range naturally over time because you will start having a better credit mix (with things like car loans and student loans) as well as a more established credit history.

It can be a long road, but it’s worth traveling because good credit is a game-changer at any age. With solid scores, you can get approved for more loans and get better interest rates. You’ll also be able to get credit cards and lines of credit that simply aren’t available to those with a lower score.

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What Can Hurt Your Credit Score?

The biggest thing that hurts your credit score is making late payments, so never pay for anything with a credit card that you will have trouble paying back. Similarly, try not to use too much of the credit on any one card because a bad debt-to-credit ratio (basically, how much credit you have versus how much debt you have) can further lower your score.

Applying for too much credit all at once can also lower your score. Believe it or not, closing accounts after you’ve paid them off can hurt your score as well. Finally, going long months with no credit use at all can affect your score, so you may want to make small purchases and then pay them off each month to maintain an active account.

How to Repair a Poor Credit Score

Many of the best ways to repair a poor credit score are similar to the methods of building good credit in the first place. For example, making payments on time can build your score back up, and signing up for a credit monitoring agency can help you identify fraud that may be lowering your score and access specific tips for improving your score.

Otherwise, you need to work on paying down debt and not opening any new credit accounts. You should also take the time to enroll in a financial literacy course for high school students for further guidance.

Build Good Habits With Everfi’s Financial Literacy Course

If you’re still wondering how to build credit as a teenager, you don’t have to find all the answers on your own. Everfi offers a number of free courses that can help you out, including the game-changing fundamentals of building credit course. Your credit score can impact your future and affect your entire life … isn’t it about time you took control of it?