How can students and young people start building credit?

Young woman with colored hair lying in bed looking at her phone and a credit card

Having a good credit score can have numerous financial benefits, including getting lower interest rates on borrowed money and better chances at loan approval

(Image credit: Su Arslanoglu / Getty Images)

Having a solid credit score is important. This three-digit number — which can "typically range from 300 and 850," with higher being better — rates your "overall creditworthiness," and it can open the door to "numerous financial benefits, including generally lower interest rates when you borrow money, access to a wider range of credit cards, better odds of being approved for various loans, and higher credit limits," said Investopedia.

But when you are just starting out financially, you will likely find yourself asking the question: How can you build good credit out of no credit? "Young adults often don't have a credit score, unless they already have a credit account," said CNBC. And getting one is not necessarily as straightforward as applying for a card, given that "there are restrictions on whom banks can extend credit to," and "the rules are strictest for people between the ages of 18 and 20," said The Wall Street Journal.

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Consider a student credit card or a secured card

There are two types of credit cards on the market that are generally easier to get than standard credit cards: student cards and secured credit cards.

Student credit cards "give college students enrolled in a two- or four-year college the chance to build credit," and they may "even let them earn rewards and receive student-centric benefits," said CNBC Select. "Though they come with a low credit limit and higher annual percentage rate (APR) than your typical credit card, they don't require that you have an established credit history," said Investopedia.

A secured credit card, meanwhile, "is similar to a regular credit card" wherein "you make purchases and make a payment when the bill comes," but there is one major difference: "You make a deposit when you open the card," which then "becomes your credit limit," said CNBC. Because of this deposit, these cards "pose little risk to the lender," said Investopedia, and if you consistently make your payments on time, "you should be able to graduate with a conventional, unsecured credit card."

Ask your parent to add you as an authorized user

If you are not sure that you're ready to get a card of your own, or you do not yet have a steady income or meet other eligibility requirements, another option to begin building credit is for your parent to add you to their credit card account as an authorized user. While the "minimum age to get a credit card and establish a credit score is 18," an authorized user "generally only needs to be 13 to 15 years old to qualify as an authorized user and start building credit, while some card issuers have no minimum age requirement at all," said CNBC Select.

As an authorized user, you can get a boost from your parent's good credit behavior and potentially even get a card of your own and enjoy rewards perks. Just keep in mind that if you (or your parent) are not responsible with the credit, that can affect both of your scores.

To reap the benefits of this, it is imperative that account information is reported to the credit bureaus. However, some "companies don't report authorized-user payment history to the major credit-reporting firms — Equifax, Experian and TransUnion — if, for example, the authorized user is under a certain age," said the Journal.

Get credit for on-time payments you are already making

Credit cards are not your only path towards building credit. Perhaps you are already responsible for a handful of bills on your own, like your cellphone bill or a subscription to a streaming service. In that case, there are various services that "allow you to count additional bills towards your score," said CNBC.

For instance, "Experian Boost can bring up your score on credit reporting agency Experian by counting phone, utility and streaming service bills, while eCredable Lift reports utility and phone payments to TransUnion." Another service called Perch "allows you to boost your score with recurring expenses such as subscription services and rent."

Becca Stanek has worked as an editor and writer in the personal finance space since 2017. She previously served as a deputy editor and later a managing editor overseeing investing and savings content at LendingTree and as an editor at the financial startup SmartAsset, where she focused on retirement- and financial-adviser-related content. Before that, Becca was a staff writer at The Week, primarily contributing to Speed Reads.