Why it’s important to open a credit card at the age of 18

Young people have plenty to worry about without thinking about their credit. Still, that three-digit number can have a big impact on your financial life, and the better your score, the easier it will be to lease your first apartment, buy a car, and even start a new career like employers check regularly your score before you are hired.

While understanding personal finance may seem a bit daunting to the uninitiated, the basics are fairly straightforward. And a good place to start is to open a credit card at 6pm so you can get started build credit at a young age and develop good money habits.

Below, we’ll discuss why it’s important to get a credit card at age 18 and what you can do to protect your credit score as a new cardholder.

Why You Should Grant Early Credit

The third most important factor in achieving one good credit score (after making payments on time and keeping your total debt down) is your length of credit history, or the amount of time you’ve had credit accounts in your name. Potential lenders would like you to be able to keep your credit accounts good for years.

In fact, a majority (83%) of people with a perfect 850 credit score are either Gen Xers or Baby Boomers, according to Experian’s researchThis shows that while it is still possible to have a perfect credit score in your 20s and 30s, consumers with a long credit history have a great advantage. Credit expert Jim Droske, who has a perfect credit score, shared with CNBC Select that the average age of his credit card accounts is 10 years and 11 months and that his oldest account is 34 years and 10 months.

How Building Good Credit Helps You Later

A good credit score offers you many benefits. Most notably, you qualify for the best loan and credit card rates, and it can also affect your auto and home insurance rates. If you have an excellent credit score, you may qualify for the best rewards credit cardsAnd perhaps most surprisingly, having a good credit history increases the chances of getting that job or promotion if your employer asks for a review of your credit report.

Another reason it’s crucial to open a credit card is to avoid using it credit invisibleIf your credit is invisible, you have no proof that you are able to borrow money. About one in ten adults, or about 26 million Americans, is, according to the Consumer Financial Protection Agency (CFPB), and it can make life more challenging.

For example, let’s say you decide on the road that you want to finance your first car, take out a mortgage on a house or open a small business. Unless you have a huge reserve of cash, you will need to apply for a loan, and it’s a lot more difficult if you don’t have a credit history.

If you were to save the money needed to cover this kind of expense, you would have to save for years to pay for it. Having access to affordable loans will help you finance some of the necessities of life in a way that suits your budget and provide more opportunities to enjoy the life you want.

How old do you have to be to get a credit card?

You can get a authorized user as young as 13 but you must be 18 to sign up for you first credit card itself

If you are ready for this step, you should be prepared to show some documentation. Due to the CARD Act of 2009, applicants between the ages of 18 and 21 must be able to provide proof of verifiable income, such as a pay slip, tax returns, commission checks, or investment statements. This measure is designed to prevent lenders from approving young applicants for high limit credit cards they are not well equipped to refund.

How to Manage Your First Credit Card Successfully

While you can sign up for your first credit card at the age of 18, it is best to wait until you can be confident that you can pay off your credits on time and in full, while also completing other financial commitments such as rent, utilities, tuition, transportation and groceriesFortunately, the best cards for building credit come with useful incentives that encourage good habits from the start.

For example, Capital One® Secured Mastercard® cardholders are automatically eligible for a higher credit limit after six months of regular, consecutive on-time payments. Since it is a secured card, you must make a refundable qualifying deposit of $ 49, $ 99, or $ 200 (based on your credit rating) to access an initial credit limit of $ 200.

Likewise, Capital One’s other credit cards encourage the same best practices. The QuicksilverOne® from Capital One® and the Capital One® Platinum credit card come with a minimum credit limit of $ 300, which can grow over time as you keep your borrower agreements and build a record of trustworthiness.

The Petal® 2 “Cashback, no fees” Visa® credit card is also intended for credit card newcomers, and it encourages timely payments with cash back rewards. When you first open the Petal 2 Visa credit card, you instantly get 1% cash back on eligible purchases. Your cash back will then increase to 1.5% after 12 on-time monthly payments, and you will receive 2% to 10% cash back from selected merchants.

But even without such incentives, there are a few simple tips you can follow to help you stay out of debt and get the most out of having a credit card.

First of all, remember that having an account does not immediately benefit your credit. “Credit scores require there to be activity on that account”, Rod Griffin, senior director of public education and advocacy for Experian tells CNBC Select.

The easiest way to do this? “Use your account to make a small purchase every month, then turn around and pay every month,” advises Griffin.

And if you plan to use your credit card for everyday expenses, try not to charge more than 10% to 30% of your credit limit to your card at one time. So if you start with a $ 500 limit on your first credit card, limit your costs to no more than $ 150 per month. By doing this, you can save your debt / credit ratio low (the second most factor in your credit score), but most importantly, get into the habit of spending only what you can afford to pay off each month.

The most important thing is to pay your bills on time; this is the biggest factor in your score. Lenders are more willing to give you credit if they see a long history of on-time payments on your credit report, even if you have a debt in your name. However, if possible, always pay your bills in full so that you never have to pay over-the-limit fees or to interest on the balance sheet.

By following these simple rules of thumb, you will start your young adult life on a solid foundation with a good name.

Main thing

There is a frustrating catch-22 that you have to deal with when you are ready to establish credit: Lenders are less likely to see you as a reliable borrower unless you have a good credit history, but it is difficult to keep any kind of track record. build without having credit to start with.

But while you can’t speed up time and accelerate your average credit age, you can prepare yourself for success by getting a good starter credit card at age 18. This will likely be one secured credit card, a student’s credit card (if you are in college) or a credit-building credit card

After a few years of responsible use of your card, your score will reflect this positive credit history. And if you stick to those good habits, you should be able to enjoy a good credit score for years to come.

Information about the Capital One® Secured Mastercard®, Capital One® Platinum Credit Card and Capital One®’s QuicksilverOne® has been independently collected by CNBC and has not been reviewed or provided by the card issuer prior to publication.

Petal 2 Visa credit card issued by WebBank, member of the FDIC.

Editor’s note: The opinions, analyzes, reviews, or recommendations expressed in this article are those of the CNBC Select editorial board only and have not been reviewed, approved, or otherwise approved by any third party.

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