Credit affects you no matter where you are in your life. Whether you’re in high school or your retirement years, your credit can help or hurt you. It’s important for you to take care of your money at every stage.
It is a vicious cycle: The less credit you have, the less likely you are to get approved for future opportunities.
If you’re still in high school but want to start building your credit now, you can. You can do it alone or get the help of your family. These are a few things you can do at a young age.
Credit is important — even for high schoolers
Just because you’re in high school doesn’t mean you can’t be financially prepared for the future. This is the best age to start learning about finance.
In the future, if you ever need a credit line or loan, lenders will look at your credit to see if you’re responsible with money.
5 ways high school students can build credit now
Building good credit early will benefit you later in life when you need to showcase that you’re responsible with money. Some examples are when you leave high school and need a private student loan for college or when you sign a lease for an apartment.
You need to prove your creditworthiness, even for a car loan. Here are a few ways you can start.
1. Check your credit report
Understanding how to read your credit report is the first step.
You can get a free credit report once a year through AnnualCreditReport.com. Read your report to see if there’s anything strange, including accounts that aren’t yours. Make sure the report is accurate and dispute any errors.
Your credit score is based on your report, from your payment history to how much credit you use. The better the report, the higher the score. And the higher the score, the more opportunities you’ll have for credit cards, low interest rates, and loan approvals.
You can get your score for free with a service like Credit Karma. Some banks offer free credit score options too.
2. Consider a credit card
Getting a credit card is a huge responsibility, and it’s hard to get approved if you don’t have any credit history.
In that case, you could try a secured credit card. A secured credit card allows you to put money on your card, which serves as your “credit limit.” Your deposit is your own cash, which means you aren’t a liability to lenders.
For example, if you put down a $500 deposit, you’ll have a $500 credit limit. Secured credit cards are a great first option for young adults.
“This will provide you a chance to learn about financial responsibility while still being monitored by family to ensure spending and debt don’t get out of control,” she said. “If you fail to make your payments, then the card provider will just keep your deposit.”
Remember that having a credit card means you’re borrowing money you’ll have to pay back (or pay upfront if you have a secured card).
Your credit will drop and you’ll owe money in interest if you don’t make regular payments in full. Talk things over with your parents to make sure a credit card is right for you before signing up.
3. Become an authorized user
If you have a parent or relative with good credit, ask if you can become an authorized user on their credit card. A card will be issued in your name, but you might not even use it. And that’s not necessarily a bad thing.
Just being authorized on the card of someone with good credit will boost your score. But there are drawbacks. Your credit can drop if the cardholder misses even one payment.
With great power comes great responsibility, so make sure you know how becoming an authorized user can affect your score before agreeing to it.
4. Get a cosigner
Cosigners can help you qualify for credit you might not qualify for on your own. By agreeing to repay your debt if you don’t, a cosigner makes you less of a risk to lenders and helps you establish and build your own credit.
There are some drawbacks, however. Not paying your bills on time and in full can hurt your — and your cosigner’s — credit. So, it’s normal for potential cosigners to be cautious.
Your cosigner can be anyone, but it’s best to choose a trusted family member or friend.
5. Don’t close accounts
Once you’ve opened a line of credit, such as a credit card, try to keep it open as long as possible. The length of your credit history is an important factor in your credit score. The longer you’ve had an account, the more responsible you appear to creditors.
It’s OK to leave an account open, even if it’s paid in full and you’re no longer using the card.
Start building credit as early as possible
You’ll start your credit journey on the right path as long as you can prove you’re responsible with your spending and payments.
Don’t confuse being young with being unstable. High school students can build good credit like anyone else. Avoid big mistakes early, or your credit will suffer.
Need a student loan?Here are our top student loan lenders of 2019!
|1 Important Disclosures for Ascent.
Before taking out private student loans, you should explore and compare all financial aid alternatives, including grants, scholarships, and federal student loans and consider your future monthly payments and income. Applying with a cosigner may improve your chance of getting approved and could help you qualify for a lower interest rate. Ascent Student Loans may be funded by Richland State Bank (RSB). Ascent Student Loan products are subject to credit qualification, completion of a loan application, verification of application information and certification of loan amount by a participating school. Loan products may not be available in certain jurisdictions, and certain restrictions, limitations; and terms and conditions may apply. Ascent is a federally registered trademark of Turnstile Capital Management (TCM) and may be used by RSB under limited license. Richland State Bank is a federally registered service mark of Richland State Bank.
* Application times vary depending on the applicants ability to supply the necessary information for submission.
2 Important Disclosures for CollegeAve.
College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or Nationwide Bank, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
Information advertised valid as of 1/1/2019. Variable interest rates may increase after consummation.
3 Important Disclosures for Discover.
* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers.
4 = Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
5 Important Disclosures for SunTrust.
Before applying for a private student loan, SunTrust recommends comparing all financial aid alternatives including grants, scholarships, and both federal and private student loans. To view and compare the available features of SunTrust private student loans, visit https://www.suntrust.com/loans/student-loans/private.
Certain restrictions and limitations may apply. SunTrust Bank reserves the right to change or discontinue this loan program without notice. Availability of all loan programs is subject to approval under the SunTrust credit policy and other criteria and may not be available in certain jurisdictions.
SunTrust Bank, Member FDIC. ©2019 SunTrust Banks, Inc. SUNTRUST, the SunTrust logo and Custom Choice Loan are trademarks of SunTrust Banks, Inc. All rights reserved.
6 Important Disclosures for LendKey.
Additional terms and conditions apply. For more details see LendKey
7 Important Disclosures for CommonBond.
A government loan is made according to rules set by the U.S. Department of Education. Government loans have fixed interest rates, meaning that the interest rate on a government loan will never go up or down.
Government loans also permit borrowers in financial trouble to use certain options, such as income-based repayment, which may help some borrowers. Depending on the type of loan that you have, the government may discharge your loan if you die or become permanently disabled.
Depending on what type of government loan that you have, you may be eligible for loan forgiveness in exchange for performing certain types of public service. If you are an active-duty service member and you obtained your government loan before you were called to active duty, you are entitled to interest rate and repayment benefits for your loan.
A private student loan is not a government loan and is not regulated by the Department of Education. A private student loan is instead regulated like other consumer loans under both state and federal law and by the terms of the promissory note with your lender.
If your private student loan has a fixed interest rate, then that rate will never go up or down. If your private student loan has a variable interest rate, then that rate will vary depending on an index rate disclosed in your application. If the interest rate on the new private student loan is less than the interest rate on your government loans, your payments will be less if you refinance.
If you don’t pay a private student loan as agreed, the lender can refer your loan to a collection agency or sue you for the unpaid amount.
Remember also that like government loans, most private loans cannot be discharged if you file bankruptcy unless you can demonstrate that repayment of the loan would cause you an undue hardship. In most bankruptcy courts, proving undue hardship is very difficult for most borrowers.
8 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|4.25% – 13.25%1||Undergraduate and Graduate|
|4.07% – 12.78%2||Undergraduate, Graduate, and Parents|
|4.84% – 13.49%3||Undergraduate and Graduate|
|4.62% – 11.47%*,4||Undergraduate and Graduate|
|4.38% – 13.38%5||Undergraduate and Graduate|
|5.85% – 6.99%6||Undergraduate and Graduate|
|3.93% – 9.81%7||Undergraduate, Graduate, and Parents|
|4.48% – 12.35%8||Undergraduate, Graduate, and Parents|