How to Build Your Credit Score as a Young Adult

When someone mentions credit cards, do you envision mountains of debt incurred during Confessions of a Shopaholic-style purchasing sprees? If so, know that the reality of these flashy pieces of plastic includes more than the risk of debt. For college students and 20-somethings, credit cards are one of the best ways to build and maintain a high credit score. Without a strong score, you’ll have trouble securing loans, renting an apartment, finding favorable rates on insurance and more.

The basics of credit scores

Before you build a credit score, you need a credit report. A credit report aggregates information about your credit record, including the number and kinds of accounts you have, whether you make payments on time and how much of your credit you use. A FICO credit score, which is reported on a scale of 300 to 850, serves as a snapshot of your report. It is based on five factors: payment history, or how often you’ve paid your accounts on time; credit utilization, or how close you are to reaching your credit limit; length of credit history; credit mix in use, including accounts like credit cards, loans and retail accounts; and new credit accounts.

Matt Schulz, senior industry analyst at, says that a score of above 720 to 725 is “just fine,” while credit card expert John Ulzheimer says that 750 and above is the ideal range for accessing the best deals lenders have to offer.

As a young adult, you have no credit score until you open accounts like your first credit card and student loans.

Ulzheimer says, “The young person is going to start out a little behind the curve … because you’re going to start with what’s referred to as a thin credit report.”

Since a major component of credit scores is how long you’ve responsibly paid off accounts, young adults’ short payment history puts them at a disadvantage. However, Ulzheimer adds that when your report becomes populated with student loans, car loans and more credit cards, “as long as you’re managing those things properly, there’s really nothing to stop you from having a good score right out of the gate.”

Your first credit card

If the only item on your credit report is currently student loans, it may be time to apply for a credit card. Ulzheimer explains that if you live off of the grid then realize you need a mortgage or new car, it will be difficult to secure loans because the credit system has no way to evaluate you.

If you’re under 21, you’ll need to follow the rules of the Credit CARD Act of 2009, which requires applicants to have a steady stream of income or an adult co-signer in order to hold an account under their own name.

“As long as you’re managing those things properly, there’s really nothing to stop you from having a good score right out of the gate.”

While these rules have made it harder for young adults to apply for credit cards, a 2016 Sallie Mae report found that 56% of undergraduate students have at least one card. Comparatively, a 2013 Sallie Mae report found that 30% of students used credit cards.

Once you find an income source, secure a co-signer, or celebrate your 22nd birthday, you have a plethora of options for your first card.

Kali Geldis, editorial director of, suggests a secured card (like the Citi Secured MasterCard) for those who have no credit history. These cards are targeted at users with low or non-existent scores, as they allow individuals to take out a small line of credit, say $50 or $200, equal to a deposit. Secured cards have a higher interest rate than most cards, but after a year or two of on-time monthly payments, your company may graduate you to a non-secured card.

Another option is a student credit card. Schulz suggests the Discover It for Students card. It offers $20 cash back for each year your GPA is above 3.0, 5% cash back in categories that change quarterly and 1% cash back on all other purchases. At the end of your first year, Discover will match your total cash back rewards. Two additional features that students will enjoy are no late fees for your first payment and no foreign transaction fees (perfect for a semester abroad).

For a simple cash back card, Schulz also likes the Citi Double Cash card. You receive cash back twice, with 1% unlimited on purchases plus 1% as you actually pay for purchases. Schulz describes the card as a “set it and forget it” option and adds that luckily for students, you don’t need excellent credit to qualify for it.

Ulzheimer’s advice for acquiring your first credit card is to look for the highest possible credit limit. Since your balance relative to your limit has a strong influence on your score, spending $300 on a retail card with a $500 limit will have a larger impact than spending the same amount on a Discover Card with a $25,000 limit.

“If you’re a disciplined consumer and a credit limit doesn’t tempt you into getting into a lot of credit card debt, apply for a general use card and try to get the largest credit card limit possible,” Ulzheimer says. “If you’ve just started working and have an income that’s kind of in line with a first job, you may not be able to go out and get a $25,000 or $30,000 limit … You may have to settle for something a little bit less.”  

Ulzheimer suggests sticking with a card from one of the four major networks — Visa, American Express, MasterCard and Discover — as larger banks will be more flexible with regard to credit limit assignments.

How to build and maintain credit over a lifetime

The habits you initially use to build a strong score are the same ones you’ll use throughout your lifetime.

Since you can’t control the age of your credit history, look at other factors that influence a score. To ensure you have a strong payment history, pay off your balances on-time and in full. If you’re forgetful, set an automatic alert each time your bill is due, or use the auto-pay option offered by your lender or bank.

Geldis says that many Millennials mistakenly believe that you need to carry a balance on your card in order to build credit. However, it’s smarter to pay off your balance every month. If you don’t think you can make a payment on time, talk to your lender as soon as possible.

“Apply for credit only when you need it … [not] excessively.”

The next factor in your credit score is credit utilization, or the amount of your limit you’re using. Geldis says you should always try not to surpass 30% of your limit, so if you have a $1,000 limit, don’t spend over $300 per month. Even if you’re making payments on time, having a large amount of debt will negatively impact your score.

Credit mix and new credit are two components that go hand-in-hand. It’s good to have a diversified mix of credit options, but don’t overextend yourself by applying for six credit cards in one day. For most students, the only credit accounts in your portfolio are student loans and credit cards, but as you reach your late 20s and 30s, you’ll add items like car and house payments, plus more credit card accounts. According to Ulzheimer, a good rule of thumb for new credit is to “apply for credit only when you need it … [not] excessively.”

If you follow these key steps — make on-time payments covering all of your balances, maintain a reasonable amount of card debt, and apply for credit only when absolutely necessary — Ulzheimer says there’s “no reason you’re not going to have fantastic scores, always.”

However, even if you adopt healthy credit habits, there’s a chance you’ll make a mistake down the road. If this happens, don’t panic.

Geldis says that just because you mess up, it doesn’t mean you’re stuck with a bad score forever. If you keep going and manage your finances effectively, you may be able to up your score. Look for the root of the problem: If you can’t pay your bill because you go to Starbucks every day and spend $7 on a drink and breakfast sandwich, dial back and ensure you can cover more essential costs.  

If you make a series of late payments, it may take a few years for these records to age and disappear from your report.

Ulzheimer says, “Improving your credit and the amount of time it takes to do so is the product of what you did in the first place” to mess it up.

To keep track of your score, check it one to two times per month. You can often receive your score for free from your card issuer, but other options include and Discover (free for everyone, not just customers). You should also check your credit report annually: Go to for free reports from the three major credit bureaus. During your monthly or annual check-ups, look for changes in your score or unexpected records. If you encounter a mistake on your report, contact the issuing bureau to dispute the error.

Once you have your first credit card and know how to ensure a strong credit score for years to come, you’ll realize that having a card doesn’t always equate to scores of debt. If used properly, credit cards will help you build healthy credit and qualify for loans further down the road.

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