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How Young Adults Can Build Credit

By: American Heritage10.03.19
Young woman using a credit card to make a mobile purchase

Becoming an adult opens up a world of new opportunities, as well as new financial responsibilities. As a young adult, and throughout your life, having easy access to affordable credit may be key to achieving big goals (like buying a car or first home) and having quick access to money in emergencies. 

Young adults understand the importance that credit will play in their lives. But one question we often hear is: How do I build my credit in the first place?

It’s a good question. After all, to qualify for a loan or credit card, you’ll need credit, which is usually built by having a loan or credit card already. That’s a bit of a Catch-22.

Fortunately, there are a few straightforward ways to start building credit when you’re young, solutions that can work even if you have little or no credit history. But, before we get to these, let’s look at what your credit score is and why it matters.



Credit scores are mainly used to gauge your reputation as a borrower. In most cases, businesses and lenders check your creditworthiness by reviewing your FICO® Score. Your score can be as low as 300 or as high as 850 – the higher the better. This number is crucial when applying for loans or credit cards, and it may be relevant when you apply for other services as well.  

Credit scores are calculated according to factors related to a person’s past and current borrowing, including: 

  • How long they’ve had credit
  • Their payment history
  • How much debt they have and what types of debt they have
  • How often they’ve applied for credit

For young people without an established track record of using credit, credit bureaus don’t have enough information to calculate a credit score. Fortunately, for the many young people building their credit from scratch, a credit card can potentially help.  



A credit card offers more than day-to-day convenience and potential rewards: It can be a valuable tool for building credit. As a revolving line of credit, a credit card gives you the flexibility to borrow money again and again, every time you swipe or tap, provided you’re continually paying down your balance.

Having a credit card for a while and using it responsibly is a great way to check off many of the boxes related to building credit – like showing that you pay your bill on time and don’t rely too much on debt. Down the road, your credit score can open up new opportunities to access credit and further boost your score. If you’re just starting out, here are two ways to build credit with a credit card:


Apply for a Secured Credit Card

While you may not qualify for a traditional card right away, you can still apply for a secured card. For this card, you’ll provide a cash deposit that your financial institution will hold as collateral, and your credit limit is equal to the amount you deposit.

With a secured credit card you’ll be able to make purchases anywhere this type of card is accepted, and your financial institution will regularly report on your cardholder activity to credit-rating agencies. Making on-time payments and fully paying off your secured card each month can help establish and improve your credit, until eventually you graduate to an unsecured card.

Here at American Heritage, our Platinum Secured Mastercard® gives you a simple, affordable way to build or rebuild credit, along with the convenience and perks of a traditional credit card.


Get on Someone Else’s Card

Another way to start building credit is to piggyback on someone else’s good credit by having them add you as an authorized user on their card. Consider asking a parent or someone else you trust, and who has a credit card with a history of on-time payments, to add you as an authorized user. If you’re just starting to build credit, having your own card with their account can give your credit a boost, provided the card’s issuer reports authorized users to the major credit bureaus. 



When applying for a traditional credit card, look for a card that offers a low rate, no annual fee, and the benefits you want (such as rewards or cash back). You want to be happy with your card because closing this card (or any credit account) can lower your credit score. This is because your credit history only goes back as far as your oldest active account.



Whether using a secured card with a low limit or traditional card with thousands of dollars in available credit, it’s important to use your card responsibly, manage your account carefully, and avoid mistakes that could hurt your credit or leave you saddled with debt.

  • Use your card regularly, not excessively: Having a card you never use can harm your credit score, so it’s good to at least use it periodically, even if it’s just for a monthly expense like your phone bill. On the other hand, depending too much on your card can lead to a high credit utilization ratio (how much of your available credit you use), which is also a red flag for the credit bureaus. It’s best to borrow no more than 30% of your available credit at a time.
  • Check your account and FICO® Score periodically: This will help you catch and address potential credit issues quickly. American Heritage members can check theirs for free.
  • Pay your bill on time: Pay off your full credit card balance each month to avoid additional interest charges. It’s a good idea to set up automatic payments to save time and avoid forgetting your payment, which can lead to late fees and affect your credit score.

Looking for the best way to improve your credit? Read our blog post for nine tips to build your credit score, and check out these strategies to help you make the most of your card while avoiding debt



At American Heritage, we know that having access to affordable credit can support your financial freedom today and your biggest goals for tomorrow. Whether you’re looking to build credit, access cash-back rewards, or finance a big purchase, our friendly team can help you find the credit card or loan option that’s right for you. 



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