These days a credit score can be a vital asset, and many young consumers are especially interested to know when is the best age to start worrying about their credit score. Most financial experts, including those who specialize in teaching financial literacy to teens, agree that the ideal time is as soon as possible.
Many young people begin to build good credit, for example, at age 20 or 21. Most of them started working to create a strong credit history as early as they could, which usually means at age 18. But even if you are under age 18 you can become proactive about your credit history with the help of a parent or guardian who agrees to cosign a loan or credit card application. There is one thing to watch out for, however, if you decide to use a cosigner. Make sure that their credit history is good before you enter into this kind of arrangement. Otherwise their bad credit could influence your own credit profile in a detrimental way, which defeats the whole purpose.
Credit card companies want to know that they can reach you if necessary and that you can repay your obligations. So before you apply for a credit card or other non-secured kind of financing or loan you should have a verifiable income, address, and a phone number listed in your own name. The best place to start when building credit is with a bank where you have a checking or savings account, and a loan officer at the bank can advise you how to build your credit and improve your score in the most efficient manner.
Even if you are not yet eligible for a credit card because you don’t have sufficient income or credit history, you can apply for a prepaid credit card. These cards are secured by cash you deposit into your account, and there are no credit checks involved. If you request the prepaid card company to report your card activity to the major credit reporting agencies they will, and that can help establish new credit and raise your credit score. One of the best is the American Express Prepaid Card, because it offers a special program to build credit and gradually qualify for a non-secured American Express credit card.
One of the big reasons for starting early instead of waiting until you are older and may have a steady job and income stream is because it takes time for credit history to pay off in terms of your score. Credit tracking and reporting agencies will open a file on you as soon as you become a borrower or get your first credit card, but one of the criteria that they look at is the length of time that you have had credit. This length of credit history typically counts for as much as 15% of your total credit score.
Although most people don’t realize it, your credit score can also have an impact on your employment. Many employers these days will check your credit rating as part of the hiring and screening process, and if you have bad credit that could hurt your chances of landing the job you want. The reason companies do this is that they figure that if you are not good at managing your own finances then you may not be reliable in other areas of your life, including your career. But if you have a great credit score they view this as a strong signal that you are responsible, mature, and dependable. So that is yet another powerful reason to start paying attention to your credit score as soon as possible, not matter how young you are.