Can You Start Building Credit at 17?

Building credit early is a strategic step towards a secure financial future, impacting loan approvals and housing opportunities. Credit represents your financial trustworthiness, a record of how reliably you manage borrowed money. For young individuals, understanding how to establish this record is important as they approach adulthood.

Legal Age for Credit Accounts

The ability to open an independent credit account, such as a credit card, is governed by federal law. The Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 requires individuals to be at least 21 years old to open a credit card account on their own, unless they can demonstrate sufficient independent income.

If an individual between 18 and 20 years old cannot prove sufficient independent income, the CARD Act mandates a co-signer over 21 who is jointly responsible for the debt. Therefore, at 17, directly applying for and being approved for a credit card in your own name is not possible.

Establishing a Credit Footprint Before 18

While opening an independent credit account at 17 is not permitted, indirect methods can help build a credit footprint. Becoming an authorized user on an existing credit card account is one strategy. This involves a parent or guardian adding the 17-year-old to their account, allowing them to use the card.

When an individual is an authorized user, the account’s payment history may be reported to credit bureaus under their name, helping establish a credit history. The primary account holder must maintain excellent credit habits, including timely payments and low credit utilization, as these behaviors reflect on the authorized user’s credit report. Confirming the issuer’s reporting policy is advisable, as not all issuers report authorized user activity or have specific age conditions for reporting.

Another approach involves a parent or guardian opening a secured credit card account and allowing the 17-year-old to use it under supervision. A secured credit card requires a cash deposit, which becomes the credit limit. While the account is legally in the parent’s name, responsible usage by the teenager, such as making small purchases and ensuring timely repayment to the parent, instills good financial habits and builds financial literacy.

Beyond specific credit products, focusing on foundational financial practices is helpful. This includes opening and managing a checking or savings account, understanding budgeting principles, and consistently saving money. These activities establish a pattern of responsible money management, beneficial when the individual becomes eligible for independent credit.

Taking the Next Steps at 18

Upon turning 18, individuals can enter into contracts, including applying for credit cards in their own name. Options depend on demonstrating sufficient independent income. Student credit cards are a common starting point for young adults with limited or no credit history.

Secured credit cards also become a direct option at 18 for establishing credit independently. These cards require a refundable security deposit that matches the credit limit. Consistent, on-time payments and low balances help build a positive credit history, potentially leading to an upgrade to an unsecured card. Retail store cards might also be accessible, though they often come with higher interest rates and lower credit limits.

Another avenue for building credit at 18 is a credit-builder loan. Unlike traditional loans, the loan amount is held in a secured account while the borrower makes regular payments. These payments are reported to credit bureaus, and once the loan is fully repaid, the funds are released to the borrower. This method combines savings with credit building and demonstrates repayment ability.

Essential Credit Habits

Once credit accounts are established, maintaining positive credit habits is essential for long-term financial health. Payment history is the most significant factor influencing credit scores. Making all payments on time is paramount. Even a single payment 30 days or more overdue can negatively impact a credit score.

Credit utilization, the amount of credit used relative to available credit, is another important factor. Experts advise keeping credit utilization below 30% of the total available credit to show responsible management. Lower utilization, such as under 10%, is even better for credit scores.

The length of credit history also contributes to a credit score. Older accounts in good standing contribute positively, demonstrating a longer track record of responsible borrowing. Regularly reviewing credit reports from the three major credit bureaus—Experian, Equifax, and TransUnion—helps ensure accuracy and identify potential issues early.