How to Build Credit at 17: Where to Start + Credit Risks to Watch For

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Turning 17 is an exciting milestone: you’re closer to adulthood, with possibilities like college, apartments, and even car ownership on the horizon. But before diving into those adventures, there’s a crucial step that many young adults miss: building credit.

Building credit at 17 might seem early, but establishing a strong credit history lays the foundation for your future financial success—especially since many Americans receive their first credit card around that age.

The earlier you start building credit, the more time you have to establish a positive track record and reap these rewards for years to come. Below, we’ll cover some strategies you can use as a 17-year-old to get a head start on building a healthy credit score.

Key takeaways:

Start early: Building credit at 17 provides a strong foundation for your financial future.
Know your options: Start building credit at 17 by opening a student credit card, becoming an authorized user, utilizing student loans, or getting a credit-building loan.
Monitor your credit score: Regularly check your credit report for errors and take steps to improve your credit score over time.

The Basics of Building Credit

Credit is essentially a loan that allows you to borrow money or use services now and pay for them later, like with a credit card or a car loan. It’s a foundational tool in personal finance, enabling you to make major purchases like cars or homes. However, you need a good credit score to access the best credit terms.

A credit score is a numerical representation of your creditworthiness, calculated based on the information in your credit report. Your credit report is a detailed record of your borrowing and repayment history, including:

Payment history: This is the most significant factor, as it shows how consistent you are in making timely payments on credit cards, loans, and other debts. A history of late payments will negatively impact your score.
Credit utilization: This measures the amount of credit you’re using compared to your total credit limit. It’s generally best to keep this ratio low.
Length of credit history: A longer credit history that shows responsible borrowing over time can positively impact your score.
New credit: This is any new credit product you open. Opening too many new credit accounts at the same time can negatively affect your score.
Credit mix: This is the different credit types you have. Having a variety of credit types (credit cards, installment loans) can be beneficial.

Why Start Building Credit at 17?

Building credit at 17 might seem premature, but it’s a smart move with long-term benefits. While you can’t open your own credit accounts until you’re 18, there are still ways to establish a positive credit history early on.

Here’s why building credit early matters:

Access to better financial products and interest rates: With a good credit score, you can unlock lower interest rates on loans, credit cards, and mortgages. This means you’ll pay less over time.
Easier approval for loans and rentals: Anytime you apply for a loan, apartment, or credit product, lenders and landlords use your credit score to assess your credit risk. A strong credit history can increase your chances of approval.
Avoid deposits for utilities and cell phone accounts: Many utility companies and cell phone providers require security deposits from customers with no credit history. Building credit can help you avoid these upfront costs.

Four Ways to Start Building Credit

Now that you understand the importance of credit, let’s explore some practical strategies to start building your credit history at 17. Keep in mind there’s no single best way to build credit, and you should choose the best method based on your unique circumstances.

Open a Student Credit Card

Best for: High school seniors and college students Individuals with no credit history Building a positive payment history quickly

Keep in mind: Use responsibly by making small purchases Consider the annual percentage rate (APR) Look out for additional fees

One of the most effective ways to begin building credit is by opening a student credit card. These cards are specifically designed for young adults with limited credit history. They often come with lower credit limits, making them a safer option for new credit users.

If you opt for a student credit card, keep in mind that it’s up to you to use it responsibly. This means using it for small, everyday purchases and not spending more than you can afford. This way, you can pay off the balance in full each month to avoid paying extra in interest.

While student credit cards often have lower APRs, comparing rates and choosing a card with a reasonable APR is still important. Some credit cards may also have annual fees or other charges, so be aware of the terms and conditions. These are important steps to take when picking your first credit card, whether or not it’s a student card.

Become an Authorized User

Best for: Those under 18 Those with no credit history

Keep in mind: Ensure the card reports to all three major credit bureaus No legal responsibility for the debt as an authorized user No direct access to the credit card

If you’re under 18, becoming an authorized user on the credit account of a trusted family member or friend with a good credit history is another way to start building credit. Since you must be 18 years old to get your credit card, becoming an authorized user is a way to start building credit before you’re 18.

As an authorized user, you’ll be added to the credit card account, and the account’s payment history will be reported to credit bureaus, impacting your credit score.

Keep in mind that while you can benefit from the primary cardholder’s positive credit habits as an authorized user, you’ll also be negatively impacted if they fail to make their payments on time. Trusting the primary cardholder to make timely payments before choosing this route is essential.

In general, becoming an authorized user is a temporary solution that’s great for teens who aren’t yet old enough to open a credit card.

Open Student Loans and Pay on Time

Best for: College students who need financial assistance for education Those who are already building credit and want to diversify their credit mix

Keep in mind: Applicable once enrolled in a college program Loans don’t impact credit until repayment begins Make a plan to ensure timely payments after graduation

While student loans are primarily for financing education, they can also contribute to your credit history. Once you start repaying your student loans, your payment history will be reported to credit bureaus. Timely payments can positively impact your credit score.

Keep in mind that student loan debt can accumulate quickly. It’s important to plan how to manage timely payments after you graduate and consider the long-term implications of borrowing money for education. Be sure you understand how the student loan terms work before signing up.

Credit-Building Loans

Best for: Those with no credit history Those with poor credit Those who want to build credit while saving money

Keep in mind: Interest rates can be higher than traditional loans Requires monthly payments toward a locked savings account Available through credit unions and some banks

Credit-building loans are a type of secured loan designed specifically to help build credit with no credit history. They’re best for those with no credit history or someone who needs to improve a poor credit score.

These loans involve depositing a set amount of money into a savings account and borrowing that amount from the lender. You make monthly payments to the lender, and your on-time payments are reported to the credit bureaus. You’ll receive the loan amount back once you complete all of your payments.

Keep in mind that missing payments can negatively impact your credit score, so set up automatic payments or reminders for payment due dates.

Credit-building loans are a great way to build credit without a credit card and practice saving money. They might not be widely available at all financial institutions, so be ready to shop around at credit unions to find a lender who offers this type of loan.

Credit Risks to Watch Out For

Building your credit is a journey, and as with any journey, there are potential pitfalls to avoid. As a new credit user, knowing these risks can help you make wise financial decisions both now and in the future.

Here are some things to be aware of when building credit:

Late or missed payments as an authorized user: While being an authorized user can help boost your credit score, make sure you fully trust the primary cardholder to make timely payments. Late or missed payments can negatively impact both their credit score and yours.
High credit card balances: Carrying a high balance on your credit card can hurt your credit score. Always pay off your balance in full each month to avoid interest charges and maintain a low credit utilization ratio.
Unnecessary credit applications: Applying for multiple credit cards in a short period can negatively impact your credit score. Only apply for credit when you genuinely need it.
High interest rates: Be aware of high interest rates on credit cards and loans. Opt for credit cards with lower APRs to minimize interest charges. That said, paying your credit card balance in full each month will help you avoid interest charges altogether.
Credit report errors: Regularly review your credit report for errors and inaccuracies, and dispute any errors to protect your credit score.

Check Your Credit Score Today

Learning how to build credit at 17 is a smart move that can set you up for years. By understanding the basics of credit and avoiding common pitfalls, you can establish a strong credit foundation.

Once you’ve started building your credit history by taking advantage of opportunities like student credit cards and authorized user status, check your free credit score to see how you’re progressing.