Establishing Credit

Importance of Establishing Credit When Young

Dear Experian,

Why is it important to establish credit while you're young? If I don't establish any credit will it affect my future and why?


Dear OZY,

Establishing credit and learning to use it wisely when you are young can make your transition to adulthood much easier.

Having your parents include you as an authorized user or joint credit card account holder is an easy first step toward building a positive credit history. Equally important, you can help your parents review the monthly statements and perhaps even help make payments.

Learning about the entire credit process, from making a charge to paying the bill, will help you manage credit well when you get out on your own. Understanding the responsibility to make every payment on time is the key to using credit to work for you, rather than becoming a slave to credit.

But a positive credit history is more important than just being able to use a credit card to buy things. Your credit history may be considered by potential employers when you are looking for your first job. It may play a part in approving your apartment application. And, it will be critical for buying your first car so you can get to work every day.

If your job requires you to travel, you will need a good credit history to qualify for a corporate credit card used to rent a car, purchase airline tickets, pay hotel bills and buy dinner for clients. Even though you are reimbursed, most company cards are personal accounts.

While you can establish credit after graduating from college, it becomes more difficult. As a truly independent adult, lenders rely on your credit history to make decisions regarding your application. Without an established credit history, it becomes more difficult to qualify for credit cards or other types of loans.

College students are prime customers because they are likely to be financially successful and have proven to be loyal customers over long periods of time. So many students receive a variety of offers.

Most credit card companies only open accounts based on prescreened applications offered to consumers whose credit history meets their risk requirements. If you don't have a credit history, you don't get any offers. College students are a rare exception. That doesn't mean you should complete every credit card application you receive.

Be selective. Only apply for accounts that offer the incentives you want and need. Those might include low interest rates, low or no annual fees, or even airline miles you can use to travel home between semesters, if you charge enough to justify the annual fee.

It also doesn't mean you can spend more than you can afford. Smart students use credit for convenience.

Responsible credit use while you are younger can build a strong credit history that will help you get your adult life off to a strong start when you set out on your own.

Thanks for asking.
The "Ask Experian" team

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