Most of the time, you have to be at least 18 years old with an income to start building credit. But that doesn’t mean you can’t get a head start on credit building at 17. It’s important to familiarize yourself with a work habit, paying bills, and savvy strategies to build credit for a better future.
Establishing good credit habits and money management skills early will help you kick off your financial future. Take a look at our top tips on how to build credit at 17.
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Do you have a credit score at 17?
17 year olds are minors, meaning they have no credit history. This makes it impossible to get a credit card or installment loan without a cosigner. Still, there are some things you can do. Here’s how to build credit and financial knowledge at 17.
How to start building credit and financial literacy
1. Learn the basics of money
First and foremost, it’s critical to understand the basics of money management. This includes earning your own money, paying for your own activities, saving and understanding how to budget.
There are many employment opportunities for responsible 17 year olds. This could be at a restaurant, coffee shop, babysitting or even finding ways to freelance and work online. Once you have some cash coming in, you can start thinking about how to spend and save.
2. Understand how credit is calculated
Your credit shows how responsible you are with debt and how likely it is for you to pay back a lender, or creditor, if they loan you money. Lenders will look at your credit history to determine whether they should grant you a loan.
One of the most important factors lenders consider is your credit score. Your credit score is a number between 350 – 850 and is calculated according to your credit history. Take a look at the most important factors that contribute to your credit score.
35% – Payment history
This shows how often you’ve made on-time payments. As you continue to make consistent, on-time payments towards your debt this part of your score will improve. Late payments, delinquent accounts, and collections will hurt your payment history.
30% – Debt owed
This shows the total amount of debt you’re using compared to your total available credit- also known as your credit utilization ratio. It’s calculated by dividing your total debt by your available credit. Ideally, you never want your credit utilization ratio to be above 30%.
15% – Length of credit history
This reflects how long you’ve been using credit and the age on your accounts. The longer you keep accounts that are in good standing open, the more improvement you will see in this area.
10% – Credit mix
This is determined by the different types of credit accounts you have open. Generally, you want to have a mix of credit cards, student loans, mortgage loans, or auto loans in good standing.
10% – New credit
Every time you apply for credit, it creates a hard inquiry on your credit report that drops your score by a few points. You want to avoid applying for credit multiple times within a short period of time.
3. Become an authorized user
Becoming an authorized user on another person’s credit card is essentially adding their credit and payment history of a particular account to your credit profile. This strategy should only be done with a parent or guardian who has a lengthy credit profile and excellent credit. You technically would not even need access to the card or line of credit to gain some credit benefits.
4. Student loans
More and more highschool programs are offering college enrollment classes for students still in high school. Taking out a student loan to pay for a college course is one way you can start building credit early on.
Although you must be 18 to access most lending products, however, under the Higher Education Act minors can apply for and obtain many government-regulated student loans. Student loans will contribute to credit building and are typically easier to acquire, but they should not be taken out frivolously.
Before taking on student loan debt, talk to a financial aid advisor at your school and make sure you have steady income to repay the loan. In most cases, you will not have to pay the loans while you are actively enrolled.
5. Save money
At 17, you might not be thinking about creating a savings plan – but the earlier you start thinking about long term financial goals the better. Saving money takes will power and thoughtful planning, which is exactly the discipline you need when opening credit accounts. If you start saving $20 each week from your 17th birthday, you could have $1,040 by the time you turn 18!
6. Monitor your credit
If you’re able to start building your credit at 17, you’ll want to keep an eye on it. Your credit report will show open and closed accounts, amounts owed and payment history. It’s important to make sure these are up to date and there are no unknown accounts under your profile.
Another way to do this is by adding a Credit Builder Loan to your financial to-do list when you turn 18. A Credit Builder Loan is designed to help you build credit, give you access to cash and create a savings plan with an affordable loan. It can also help you monitor your credit for just $19.99/month
Start making smart financial moves early
The earlier you get in the habit of making smart financial moves, the more prepared you’ll be for your financial future. As you’re waiting to turn 18, make sure to check out MoneyLion’s financial resources library. There’s a host of information and financial advice on everything from credit to investing.
MoneyLion can help you get a head start on your financial future!