How to Build Your Credit History When You’re a College Student

Find out some of the best ways to build credit history fast, even if you're only 18 and have no credit.

How to Build Your Credit History When You’re a College Student

Think establishing good credit is only important for people with actual assets? That’s absolutely not true. If you ever want to rent an apartment, adjust student loans, apply for any credit card, or borrow any money from any bank for any reason whatsoever, bad credit or having no credit history will become a tremendous source of long-term frustration. 

But how do you build credit in the first place? Unless you’ve had a credit card with a parent where you are an authorized user, there’s a very good chance that you have no credit history when you’re under the age of 18. Indeed, you legally have to be 18 to enter into a credit card agreement in your own name; and qualifying for a credit card before you’re 21 can be very difficult. 

The good news is there are ways to build credit when you’re young and your credit history is blank (called a “thin file” by credit bureaus). Getting an early start on building your credit history is something everyone should be doing, but it is especially important for college-age people since college students may have to deal with student loans and ideally would like to have some credit history established by the time they’ve graduated and are looking for a job. 

Read on for a breakdown of how to establish credit and the best ways to build credit fast.

Table of Contents

How to Start Building Credit at 18

In order to sign a credit card contract, in your own name, you'll need to be at least 18 years old. However, ever since the Credit Card Accountability Responsibility and Disclosure Act of 2009 was passed, getting an unsecured credit card before you turn 21 years old can be quite difficult. This is because you'll need to show proof that you have a steady source of income to qualify for a credit card. So, how can I build my credit when I’m only 18 or younger?

Become an Authorized User on a Credit Card

One of the best ways to build credit when you’re under 18 is to become an authorized user on a parent’s credit card. Being an authorized user means you'll get your own card, but the primary cardmember is the one responsible for your credit card spending. By becoming an authorized user on a credit card, you can start building good credit and establish credit history, but only if the credit card issuer reports authorized user activity to the credit agencies and the primary cardmember pays balances on time.

Get a Secured Credit Card

If you’re wondering how to start building credit scores from scratch, a good place to start is with a secured credit card. The way a secured card works is that you put down a cash deposit upfront, which serves as collateral against the risk of you not paying your credit balances. Also, the deposit amount on a secured credit card is typically the same as your credit limit. The minimum and maximum deposit amount you can put down varies depending on the credit card issuer. It is common for secured credit cards to require a minimum deposit of $200.

Using a secured credit card is a great strategy for how to build credit with a credit card. You’ll use the secured credit card like any other credit card, such as making purchases, making payments on or before the due date, incurring interest on your credit balance if you don’t pay your balance in full. When or if you decide to close the secured credit card account, you’ll receive your deposit back. But in the process of responsibly using a secured credit card, you’ll be on your way to building good credit.

The point of using a secured credit cards is that they’re meant to be used for a limited time. Once you’ve used a secured credit card long enough, ideally you will have built your credit history and credit score enough to qualify for an unsecured card — aka a conventional credit card without a deposit and, usually, with better benefits. When getting a secured credit card, make sure it reports payment data to all three credit bureaus: Equifax, Experian, and TransUnion. These credit agencies are essential to building good credit because they compile your payment history into credit reports, and credit cards that report to all three credit agencies enable you to build a more thorough credit history. 

Build Credit History Using the Bills You Pay

Another one of the best ways to build credit history is to utilize rent-reporting services, companies which take a bill you’re currently paying and report it to the credit bureaus. Some examples of rent-reporting services to check out include Rent Reporters, LevelCredit, Rock the Score, PaymentReport, and Rental Kharma, among others. Taking advantage of these rent-reporting services is one of the best ways to build credit fast. But do your research and make sure your rent payments are being reported properly to the credit bureaus and that your credit score takes these payments into account.

A recent development in line with rent-reporting services is Experian Boost. This service offered by Experian provides another way to build credit fast by having your cell phone and utility bills incorporated into your credit report with that credit bureau. However, since the service is Experian Boost, its effects are ultimately restricted to just one credit bureau — Experian. Still, it’s one of the better ways to build credit fast when you don’t have many or any other credit lines to do it on.

Try Out a Credit-Builder Product

If you want another method for how to start building credit, check out a credit-builder loan. The main purpose of this kind of financial product is to help you build credit history. Usually, the way it works is that the money you borrow is held by the lender in an account, which is withheld from you until you repay the loan. A credit-builder loan like this is essentially a mandatory savings program, in which your payments are reported to the credit agencies. These types of credit-builder loans are most often offered by credit unions or community banks, rather than big-name banks.

A similar approach to building good credit involves going to a bank or credit union where you have money on deposit and ask them if you can get a secured loan for credit-building. With a secured loan for credit-building, the money in your account serves as the collateral underwriting the loan. The interest rate on these kinds of loans is usually higher than the interest you earn on the account, yet it could be much lower than interest rates you’d get with other products.

How Long Does It Take to Build Credit?

On the question of how long does it take to establish credit, the answer is that it typically takes about six months of credit activity to establish enough history for a FICO credit score. And FICO credit scores are used by 90% of top lenders, according to the FICO score website. FICO credit scores range from 300 to 850, with a score of over 700 being considered a good credit score. If you have a credit score that’s over 800, then your credit is considered excellent. 

Though it can take as little as six months to build credit history, you shouldn’t anticipate a great credit score right from the get-go. Although you can build up sufficient credit history in less than a year to produce a credit score, it generally takes several years of responsible credit use to attain a good or excellent credit score. Having multiple credit lines, such as having a credit card, an auto loan, and a student loan, and paying them all on time (and ideally above the minimum payment) is definitely one of the best ways to build credit fast.

5 Tips for How to Build Your Credit Fast

Thus, though it may take some time to build credit history, there are many ways to build credit fast. Whether you’re a college student or not, here are some good strategies for building good credit and how to build credit with a credit card:

1. Use Less Than 30% of Your Available Credit

An important factor that goes into calculating your credit score is what’s called your credit utilization ratio. This is the ratio of your outstanding balance to your total credit limit. Thus, if your monthly credit card spending often reaches close to your credit limit, you’ll have a high credit utilization ratio and this can easily have a negative effect on your credit score; even if you pay off your credit card bills in a timely fashion, if you allow your credit utilization ratio to get too high, it’ll still impact your credit score negatively. A general rule-of-thumb is to keep your spending below 30% of your limit, if not more. Maintaining a low credit utilization ratio is one of the best ways to build good credit.

2. Don’t Close Credit Card Accounts

You may understandably think that having fewer credit cards would help boost your credit score — since you’d have less outstanding debt and a lower credit utilization ratio — but that’s not necessarily true. In fact, the opposite is true — lenders want to see you using credit lines responsibly, repaying balances and doing so on time. By closing credit card accounts, you can actually negatively impact your credit score because closing a card entails losing its limit, which can affect your overall credit utilization ratio. Instead, if you have credit cards that you don’t use often, don’t close the accounts; just continue to maintain a low credit utilization ratio, and this will help in building good credit history.

3. Always Pay Your Bills On Time

Paying your rent and utility bills with a credit card and doing so on time is the best way to build credit and improve your credit score. A great way to take the human element out of this is to set up automatic payments from your bank account to your credit account, so you’ll never miss a due date or minimum payment.

4. Dispute Incorrect Information on Your Credit Report

When building good credit, it’s essential to monitor your credit report. You can request a free annual credit report by contacting any of the three credit bureaus: Equifax, Experian, or TransUnion. While keeping an eye on your credit report, if you spot an inaccuracy, contact the credit reporting agency as soon as possible to fix it. Although there is no time limit on correcting inaccuracies, you don’t want to let an error on your credit report sit and become a bigger issue later on, such as an inaccurate charge that you don’t recognize eventually going to collections. 

5. Use Retail Credit Cards or Gas Cards

Open an account with a retail store or gasoline company to, again, help establish or reestablish your credit. These credit cards are easier to obtain and often have the added security of low limits and balances that must be paid in full every month.

The Bottom Line on the Best Way to Build Credit

Irrespective of whether you are building good credit from scratch or rebuilding a less-than-stellar credit score, regularly keeping an eye on your credit is essential to ensure your efforts are paying off. To monitor your credit reports and scores on a regular basis, you can enroll in credit monitoring tools offered by the credit bureaus like Equifax, Experian, and TransUnion. Often you can keep an eye on your credit score through your bank account or credit card account, which nowadays commonly provide access to your FICO score. Lastly, you’re entitled to a free credit report annually from each one of the three credit bureaus. Combining effective credit monitoring with responsible credit use, ideally on multiple credit lines, is definitely one of the best ways to build credit fast and improve your score. 

Andrew DePietro

Author: Andrew DePietro

Senior Researcher, and Content Strategist

Andrew DePietro is a finance writer covering topics such as entrepreneurship, investing, real estate and college for BrokeScholar, Forbes, CreditKarma, and more.