The Secret To Building A Great Credit Score When You're Young

Just because you recently became an "adult" doesn't mean you can't build excellent credit.

Jul 20, 2014 at 12:00PM

Of all the things on the typical 18-year-old's mind, building up a solid credit score is usually not on top of the list. However, with just a little bit of effort and a decent understanding of how credit works, it's actually quite easy to build up a credit score in the "very good" or "excellent" range from scratch in just a year or two.

Here is a "cheat sheet" that can help you achieve an adult credit score while still in your teens.

What your credit score is made of
Fortunately, the largest components of your credit score are the easiest for younger adults to control.

According to, where you can obtain your actual FICO score (the credit score lenders use), there are five categories of information which make up your score. And, some of the smaller categories definitely put younger adults at a disadvantage.

For instance, 15% of your score is based on the length of your credit history. Well, if you are 18 or 19, it's not very long at all. Another 10% is based on the mix of different types of credit you use. Generally, 18 year olds are not going to have mortgages, car loans, or other kinds of credit accounts more common to older adults. In other words, the lack of "diversity" on a younger consumer's credit report can be viewed as a negative.

However, the other three categories make up 75% of your score, and can easily be made to look good for younger borrowers. The largest category, "payment history", makes up 35% of your score and may sound like newer borrowers might be at a disadvantage. Not so. The payment history category only takes into account the payment history of your current accounts. If you have no late payments whatsoever, you'll ace this part of the formula.

Another 30% is made of the amounts you owe. We'll get into this more in a second, but this refers to the amount you borrow relative to the amount you can borrow.

The last 10% is made up of "new credit", or how many accounts you open in short amounts of time. In other words, opening one credit card is fine, and can actually help your score. Opening seven credit cards during the month you turn 18 will probably hold your score back considerably.

Get a credit card (or two) and use it responsibly
Shortly after you turn 18, open a credit card account. I know you've probably been warned about the "evils" of credit cards, especially if your a college student. And the warnings are all true...if you use your credit cards improperly. Just like anything else, there is a right way and a wrong way to use credit cards. Let's take a look at the right way to do it.

Credit Cards Pixabay Jarmoluk


I'm talking about opening one, or maybe two credit card accounts and using them for things you were going to buy anyway. If you were going to pay cash for a book, charge it and pay it right off.

There are some excellent credit cards designed specifically for students, and maintains an excellent list with descriptions here.

The number one thing not to do is carry a high balance. If you start out with a $1,000 credit limit and run up a balance of $800 on the card, it's not good for your credit. The average "high achiever" (people with awesome FICO scores) carries a balance from month-to-month of about 7% of their credit line.

So, if you have to charge a couple of books and wait until next month to pay for them, it's probably fine. If you max out your card by charging a spring break trip, it's another matter...

Keep an eye on it
Once you've set yourself on the right path by opening a credit account and using it responsibly, keep track of your progress. As I mentioned, can give you the actual score most lenders see, so it may be worth the monthly cost.

Binoculars Ante Perkovic

Ante Perkovic

Also, all U.S. consumers are entitled to a free copy of their credit report once a year from each of the three major credit bureaus (Experian, Equifax, and TransUnion). Take advantage of this, and make sure the information you see is accurate while you're reading over the reports.

If you use a little restraint and common sense, and know how the system works, by the time you are out of school, you could have a credit score that will be the envy of all the other 20-somethings you know.

Credit cards could be going away. And you can make money when it happens!
The plastic in your wallet is about to go the way of the typewriter, the VCR, and the 8-track tape player. When it does, a handful of investors could stand to get very rich. You can join them -- but you must act now. An eye-opening new presentation reveals the full story on why your credit card is about to be worthless -- and highlights one little-known company sitting at the epicenter of an earth-shaking movement that could hand early investors the kind of profits we haven't seen since the dot-com days. Click here to watch this stunning video.

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers