Establishing good credit early, ideally starting at 17, sets a solid financial foundation for the future. This practice is not just about achieving a high credit score but also about cultivating responsible credit building habits.

Credit scores, which lenders, landlords, and service providers use to gauge your creditworthiness, typically begin at age 18. Most teenagers start with scores below 600. However, consider a survey by Step highlighting the financial benefits for 18-year-olds with a credit score of 725 compared to those with lower scores.

For instance, these benefits include paying $147 per month for car insurance instead of $250, securing student loans at a 6.24% interest rate rather than 10.46%, and needing only one month's rent for a security deposit, not two. Beginning to build credit at 17 not only aids in future financial situations but also offers immediate advantages in terms of costs and opportunities.

Become an Authorized User on Your Parents’ Credit Card

Being an authorized user of your parent's credit card is a classic way to build credit early. When a parent allows a child, the credit card company reports usage and payments to credit bureaus. These bureaus collect and share credit information banks and other financial institutions use to approve loans. This also applies to authorized users.

Credit card companies have different rules about the minimum age for adding a child as an authorized user, with some having no minimum age requirement. The steps to add your child as an authorized user are straightforward:

• Contact your credit card company to understand the requirements for adding a child as an authorized user.
• Add your child as an authorized user through a phone call or your credit card's online dashboard.
• Give your child an additional card (not all companies offer this).

However, there are risks involved. Poor credit card usage by the parents can negatively impact the child's credit. Also, some parents add their child as an authorized user but don't give them access to the card. While this still builds credit, it doesn't teach the child responsible credit card use.

Get a Secured Credit Card

Secured credit cards differ from unsecured ones mainly because they require a security deposit to open an account. On the other hand, unsecured cards, which are the typical credit cards most are familiar with, don't need this deposit. For a secured card, you give a cash deposit that usually equals your credit limit—for example, a $200 deposit for a $200 credit limit.

Secured cards are less risky for issuers because they can keep the deposit if payments are not made. Therefore, they are easier to get approved for. You use a secured card just like an unsecured one: make purchases and then pay the bill. Staying within your credit building limit and making timely payments every month is essential.

Payments made on secured cards are usually reported to major credit reporting agencies. Timely payments demonstrate your responsibility and ability to repay debts, which helps build a positive credit history. However, most secured cards, including those targeted at college students, are intended for adults. An exception is the Step Visa Card, designed for minors, allowing them building credit at 17 at a young age.

Secured Credit Card Account Step Banking

Step Banking offers a unique Visa Card designed for kids and teens, combining the benefits of a credit card with the safety of a debit card. This card is handy for building credit at 17. By signing up for this card, teens can establish a credit history early, which is crucial for future financial endeavors.

Parents can sponsor the card and choose to have Step report up to two years of their child's economic activity to credit bureaus when they turn 18. This early start in credit building is effective; a Step survey revealed that 18-year-olds who used the service for at least seven months had an average credit score of 725, compared to the usual score below 600 for most teens.

The Step Visa Card is available through a mobile app on both Apple iOS and Android platforms, and no monthly fees are involved. The card account is FDIC-insured, ensuring security for the funds. Parents can transfer money directly into their child’s account. Children receive both a physical and virtual card for spending, which can be used wherever Visa is accepted, and they can withdraw cash without fees at over 30,000 ATMs.

To prevent overspending, the card does not allow overdrafts. Teens can only spend the money available in their accounts. Additional features include the ability to set Savings Goals, which can earn 5% annual interest on saved funds, and a Savings Roundup feature that rounds up purchases to the nearest dollar, contributing the extra to savings. Users aged 13 and over can also buy and sell Bitcoin and earn cash or rewards from various companies.

The Step Card comes with Visa’s Fraud Protection and Zero Liability guarantee, ensuring safety against unauthorized transactions. As teens transition into adulthood at 18, Step makes it easy to maintain their accounts and continue their journey in credit building seamlessly.

Auto Loan Co-Borrowing

Usually, under-18 teens can't sign car loan contracts. Some places allow 17-year-olds to get car loans with adult co-signers: the adult co-signer or co-borrower shares loan responsibility. If the teen can't make payments, the adult has to pay. When a teen and an adult co-sign, they both have legal rights to the car, and the loan goes in the teen's name.

Making car loan payments on time is an excellent way for teens to build credit at 17. But, if payments are missed, it could hurt both the teen's and the adult's credit scores. Having a car loan as a teen can improve their credit mix, which is good for their credit score. Also, getting a car loan means a teen can drive without spending all their savings on buying a car.

Investigate Your Credit Report

Credit report checking should begin as a teenager. You should still check your credit report even if nothing is on it. This detects identity theft early. Teens can get a free credit report from the major credit bureaus at AnnualCreditReport.com. This helps teens start building credit at 17 and understand their finances early on.