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Taylor Hughs
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18 years old - Best ways to build credit for my first loans...

Taylor Hughs
Posted Jan 7 2024, 15:41

Hey BP community! My name is Taylor, I am 18 years old and a senior in high school. I will be attending Baylor, SMU, or A&M next year and am looking to house hack somewhere around my campus to start my investing journey towards financial freedom. I have been on this real estate adventure for the past month now and have read 3 books, listened to over 100 hours of podcasts and videos, aswell as getting my first credit card. My family has always been avid about me providing for my self so I have and am working right now to pay for my own expenses. 


My question is: How do I build my credit score in the most effective and efficient way (more cards, what purchases, financing purchases, etc.)? 

I'd like to buy my first home in college preferably a small multifamily and being to snowball my career from there. The main issue I found was needing a credit score for loans and to show a history to private lenders so, I am starting my credit journey now along with my education journey and hopefully being able to intern somewhere or with someone (if anyone is willing or knows anyone please let me know) now. Anyways, I have decided I need to build my credit as soon as I can, and if you have any tips or pointers to make this process as efficient and effective as possible please provide me with the secrets you have learned from your credit path. Thank you so much in advance, this community is amazing. 

Taylor

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David M.
  • Morris County, NJ
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David M.
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Replied Jan 7 2024, 16:06

@Taylor Hughs

Yup, thats the tough one.  Its a credit HISTORY for a reasons, and generally youc can't get a credit card until you are 18...

Get on, usually at college there are offers everywhere --- although, I hear now you have to get a secured card.  Start whereever you can.

There are plenty of online "tutuorials" on how to build credit.  In short, just don't carry a balance.  If you are fearful of going into debt (which is a whole other problem), just put a few charges on it a month.  When the statement comes, pay it off in full.  That builds the HISTORY of you being able to manage the credit/debt.

Never (well, in your time scale) close your initial card(s).  the credit HISTORY only looks at open accounts for some reason.  

There is NO reason to be actually paying interest --- at least on credit cards.

Hope that helps to get you started.  Happy to chat.  Good luck.

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Taylor Hughs
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Taylor Hughs
Replied Jan 7 2024, 16:10
Quote from @David M.:

@Taylor Hughs

Yup, thats the tough one.  Its a credit HISTORY for a reasons, and generally youc can't get a credit card until you are 18...

Get on, usually at college there are offers everywhere --- although, I hear now you have to get a secured card.  Start whereever you can.

There are plenty of online "tutuorials" on how to build credit.  In short, just don't carry a balance.  If you are fearful of going into debt (which is a whole other problem), just put a few charges on it a month.  When the statement comes, pay it off in full.  That builds the HISTORY of you being able to manage the credit/debt.

Never (well, in your time scale) close your initial card(s).  the credit HISTORY only looks at open accounts for some reason.  

There is NO reason to be actually paying interest --- at least on credit cards.

Hope that helps to get you started.  Happy to chat.  Good luck.


 Thank you David, this really helps. I acquired my first card last week so I have begun the journey of building a credit history. I'll be sure to look up some videos. Thank you again!

Taylor

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Joe S.
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Joe S.
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Replied Jan 7 2024, 18:56

Many banks will allow you to open a savings account and then borrow against the savings account and they put a hold on it. My first loan I did years ago was for $500, but it helped. That’s pretty much a no-brainer for a bank.Just make sure that it is a bank that reports on your credit.

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Dan Sheeks
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Dan Sheeks
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Replied Jan 7 2024, 19:25

My advice would be to read the Bigger Pockets’ book First to a Million (and the workbook). It’s written for young aspiring investors just like you.

Read chapters 11 and 12 about building credit and credit cards.

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Taylor Hughs
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Taylor Hughs
Replied Jan 7 2024, 20:19
Quote from @Joe S.:

Many banks will allow you to open a savings account and then borrow against the savings account and they put a hold on it. My first loan I did years ago was for $500, but it helped. That’s pretty much a no-brainer for a bank.Just make sure that it is a bank that reports on your credit.


 Thanks, this helps I'll defiantly look into this. I really appreciate you reaching out.

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Taylor Hughs
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Taylor Hughs
Replied Jan 7 2024, 20:19
Quote from @Dan Sheeks:

My advice would be to read the Bigger Pockets’ book First to a Million (and the workbook). It’s written for young aspiring investors just like you.

Read chapters 11 and 12 about building credit and credit cards.


 I will purchase your book soon and read these chapters.

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Alecia Loveless
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Alecia Loveless
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Replied Jan 7 2024, 20:47

@Taylor Hughs I’m sure you probably have a cell phone. I think if you put it on your credit card and pay it off every month it should also help build your credit. If your parents currently pay that bill for you perhaps they will write you a check or give you cash to continue paying for it, or write the check to your credit card.

Another thing I will suggest for you to consider for later on In life once you get into a serious relationship is to NOT put your significant other on your credit card with your longest term length of being open. Sometimes if you need to remove them for whatever reason, a break up, or something else you may have to close the entire card and that can significantly reduce the age of your credit.

I had a card that had been open for 26 years and had added my wife that I had been with for 10 years. After 20 years together we divorced. At the time, the effective combined age on my credit score was around 14 years. The credit card company had to shut the whole account down and they were more than happy to give me a new card with a higher limit but now 6 years later the combined age of my credit is still only around 6.4 years. It probably wouldn’t ultimately matter to me but when you’re starting out and your age is only 2 years it matters a lot if you start closing accounts and your age drops down to 8 months. You won’t get loans.

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Taylor Hughs
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Taylor Hughs
Replied Jan 7 2024, 22:13
Quote from @Alecia Loveless:

@Taylor Hughs I’m sure you probably have a cell phone. I think if you put it on your credit card and pay it off every month it should also help build your credit. If your parents currently pay that bill for you perhaps they will write you a check or give you cash to continue paying for it, or write the check to your credit card.

Another thing I will suggest for you to consider for later on In life once you get into a serious relationship is to NOT put your significant other on your credit card with your longest term length of being open. Sometimes if you need to remove them for whatever reason, a break up, or something else you may have to close the entire card and that can significantly reduce the age of your credit.

I had a card that had been open for 26 years and had added my wife that I had been with for 10 years. After 20 years together we divorced. At the time, the effective combined age on my credit score was around 14 years. The credit card company had to shut the whole account down and they were more than happy to give me a new card with a higher limit but now 6 years later the combined age of my credit is still only around 6.4 years. It probably wouldn’t ultimately matter to me but when you’re starting out and your age is only 2 years it matters a lot if you start closing accounts and your age drops down to 8 months. You won’t get loans.


 Thats a really good tip, thank you so much!

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Stewart VanValkenburg
  • Provo, UT
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Replied Jan 7 2024, 23:32

2nd part of qualifying for a loan is how much you make. Do you have a job? Or a relative that is willing to cosign with you? Preferably both. Credit scores do depend somewhat on your credit limit. One big factor on raising your credit limit is your yearly income. 

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Taylor Hughs
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Taylor Hughs
Replied Jan 8 2024, 09:44
Quote from @Stewart VanValkenburg:

2nd part of qualifying for a loan is how much you make. Do you have a job? Or a relative that is willing to cosign with you? Preferably both. Credit scores do depend somewhat on your credit limit. One big factor on raising your credit limit is your yearly income. 


 I do but nothing with a crazy salary, that's a good point thank you Stewart!

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Denis Ponder
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Denis Ponder
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Replied Jan 8 2024, 14:28

I got credit cards in my kids' names when they turned 16; set them up as authorized users.  They never had to ask for gas money, could use the card if they were going to dinner with friends (after asking for permission) or on sports trips, I got the points, and it slowly started to build their credit history.  I know it's a little late for you, but something for other folks to consider in a similar position.


Other than that, get a card now and put little things on it monthly and pay it off.  Gotta start somewhere.

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John McDonald
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John McDonald
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Replied Jan 8 2024, 15:04

If your parents have good credit, you could ask to be added as an authorized user on one of their credit cards. This can help your score, as long as the primary user maintains good credit habits. You do not have to have a copy of the card or use it, so your parents will be more likely to say yes.