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How to Build Credit in High School

Learn how you can establish your credit and get a jumpstart on a good credit score.

There technically is no minimum age to start building your credit. However, establishing and building credit while you’re in high school is an important decision. One that should be made between you and your parents. The limited options available are car loans and credit cards.

Both options have their pros and cons, so let’s dig a little deeper and help you find the best option to start building your credit today.student with credit card

Car loans

A car loan is a great way to start building credit. A small loan for a decent used car should be a manageable way to start credit. There are a few things to look for:

  • Interest rates — Because your credit is low/non-existent, a high schooler is going to get stuck with a rather high interest rate. Compound that with a limited income from a part-time job, and you’re looking at the highest rates possible. Shop around and talk with advisors at your credit union to see what your best options may be.
  • Low maximum loan amount — You have a limited source of income as a high school student and a low credit score, so you won’t get a very high loan amount, probably $15,000-$20,000 at the most. Don’t think you need to max out your loan, though. You don’t need a cheap new car or an expensive used car. Be reasonable with your expectations.
  • Co-signers — You’re going to need one, especially if you’re under 18. Most likely this will be your parents, but it could be any adult willing to sign. They should be someone you trust and someone who trusts you. The better the credit score of your co-signer, the better chance you have at getting a lower interest rate.

One major advantage of taking out a car loan is that you have a car to show in the end. For a small monthly payment, you’ll have your first car and a start on your credit history.

Credit card

One thing to consider if you’re getting a credit card as a high schooler is what boundaries you’re going to put on its use. Maybe you only use it for gas or to pay a few small regular payments like a media subscription. Keep the amount reasonable and well within your budget.

  • Interest rates — Credit cards have compounding interest. That means if you don’t pay them off, the interest is added to the remaining balance you don’t pay off at the end of the month. And then interest is added to that new amount if you don’t pay it off next month. Also, credit cards are going to have a high-interest rate no matter what, but being young and with little or no credit, you’re looking at 20% or more.
  • Low credit limit — This is a good thing in the long run. Anyone issuing you credit at this point in your life is going to take a huge risk. You have little or no credit and a limited income, so a low credit limit keeps you from getting too far over your head.
  • Authorized user — Similar to having a co-signer, you can get a better rate if you’re an authorized user on a credit card belonging to someone with established credit, like your parents. You’ll have a card in your name, but the responsibility to pay it is technically on the primary cardholder. Like a co-signer, there will have to be a close, trustworthy relationship between you and the primary holder. If you abuse the card, they are on the hook.

The advantage of a credit card is that you can build your credit from scratch without ever incurring any actual debt, if you’re careful.

If you’re looking to establish credit, you’re going to need to start small and probably get some help. Think about why you need to establish credit and what options best suit you. Talk to your parents and an advisor at your local credit union if you have any more questions on how to get started establishing good credit now.

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