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It's never too early: How to build good credit in high school

You can build good credit and put yourself on a path to financial success even if you're still in high school. Here's how to become an authorized user of a card or attain your own credit card before you graduate school.

If you haven’t finished high school and you’re already thinking about how you can build credit, you deserve anÌýaward. Most high school students are more focused on the next assignment or the next college prepÌýactivity than on settingÌýthemselves up for financial success in adulthood.

Right now, your ability toÌýget your own credit card isÌývery limited. The ideal time to apply forÌýoneÌýis after you’ve finished high school and have eitherÌýÌýor gotten your first full-time job.

ButÌýyou might be able to begin building a credit history now.ÌýLet’s look at why it’s important to build credit, and then we’ll discuss some of your options.

Why credit is important

Your credit score is a measureÌýof how well you’ve handled credit, which is another name for borrowed money. Having a good credit score means you’re a low-risk borrower, so lenders will give youÌýlowerÌýinterest rates and better terms on loans — such as auto loans, mortgages and, yes,Ìý. But a good score can alsoÌýsignal that you’re financially responsible in general. Landlords, employers and insurance agents also use your score to make decisions about you.

You won’t experience most of the benefits of good credit until you’re living on your own. But it’s not too early to set yourself up for those benefits.

Age restrictions on credit card applicants

Federal lawÌýrestricts how lenders can extend credit to young people. The restrictions are intended to preventÌýyoung adults from running up debts that they can’tÌýrepay, and theyÌýmake itÌývery difficult to get a card until you turn 21.

There are only two ways you can get a credit card of your own before you can legally drink:

• Work full time.ÌýHaving anÌýincome makes lenders more confident that you’ll be able to pay back any money you borrow. You don’t have to earn big bucks, but you probably won’t qualify if you work only a few hours each week. This is one area in whichÌýhigh school grads who go directly into the workforce might have a leg up on those who go to college.
• Find a co-signer.ÌýA co-signer agrees to share responsibility for your credit account. He or she isÌýon the hook if you don’t pay your bills, so you’ll probably want to ask aÌýparent or another close relative who trusts you to use the card responsiblyÌý— and who hasÌýgood enough credit to qualify. Not all credit card companiesÌýallow co-signers, so check out ourÌý.

If you can’t get your own credit card

It’s all right if you don’t have a relativeÌýwilling to co-sign on your credit card application. You can still useÌýsomeone else’s strong credit history to build your own by becoming an authorized user onÌýa friend or family member’sÌýexisting account.

In this situation, youÌýreceiveÌýa credit card with your name on itÌýthat’sÌýtied to your friend or family member’sÌýaccount. You’re not responsible for paying the bills — the account holder is.

Not all credit card issuers report authorized user activity to the credit bureaus, the companies thatÌýassemble the credit reports that form the basis for credit scores. So it’s a smart move to call the issuer and ask.ÌýEven if the issuer does report, your behavior won’tÌýhave as great anÌýÌýas it would if you had your own account. Still, every little bit helps when you’re starting from zero. AndÌýit’s a way to practice using a cardÌýand building good credit habits.

Best practices for building credit

Once you have access to a credit card, using it wisely will let you build credit muchÌýmore quickly. That’s not particularly complicated, but it does take discipline. We could write volumes about this topic, but here are the most important points:

• Use the card regularly.ÌýAn active account does more for your score than oneÌýthat’s unused. Making at least one small purchase with an account each month shows that you’re actually using the credit that’s been extended to you.
• Keep your balance low.ÌýWe recommend that you pay your credit card bill in full every month. Doing so lets you avoid interest charges, and youÌýÌýfrom one month to the next to have excellent credit. But if you do carry a balance, try to keep itÌýunder 30% of your available credit — less than 10% is better still. This will minimize the impact on your credit score.
• Pay your bill on time.ÌýMaking at least the minimum payment by the due date every single month is the most important thing you can do to keep your creditÌýhealthy.

What you can do right now

Even if you can’t get a credit card quite yet, there are still ways to prepareÌýyourself to haveÌýhealthy credit later on. For example, you can educate yourself about how credit works or talk to adults you admire about financial lessons they’ve learned. When you’re ready for yourÌý, you’ll be able to put it to good use.

Virginia C. McGuire is a staff writer atÌýNerdWallet, a personal finance website. Email:virginia@. Twitter:Ìý.

This article first appeared at .