At What Age Should You Start to Build Up Your Credit?

As far as credit scoring is concerned, the best thing you can do is start building credit as soon as possible, even if you are a young child. Theoretically, you could build enough credit as a child to get a mortgage and car loan at the age of 18. However, building credit at a young age leaves you open to the pitfalls of inexperienced borrowers.

Credit Score

The standard credit scoring model counts the length of credit history for 15 percent of a borrower's score. The sooner you start building credit, the quicker you can maximize this category and have the best chance at getting a low rate on a loan. Also, assuming you never miss a payment while building a credit score young or carry a large balance, you probably have much more positive payment data than a borrower of a similar age.

Benefits

You will probably move out of your parent's home at some point. Many of the luxuries and necessities you want require a good credit unless you can accept paying hundreds of dollars in security deposits. Landlords and utility companies, for instance, usually run a credit check to determine if they want you as a customer or need a deposit. Employers factor credit reports into their hiring decisions.

Potential Downside

Negative items affect your credit history for seven years or more, except for credit inquiries, which only stay for a year. Defaulting on an account when you are young could prevent you from obtaining credit later in life, such as after graduation when you may need it the most. You could wrack up significant debt and spend years paying it off and end up spending much more than the actual cost of the goods in finance charges.

Tip

If building credit at a young age concerns you and you are under 18, ask your parents to add you as an authorized user on an account. This is the best option for a teen, because you do not legally owe the debt or receive the bill. However, ask your parents for advice on managing credit so you can handle an account on your own when you become an adult. Borrowers under 21 must have a cosigner on their account to get a credit card or prove they have some consistent income.