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Dr. Don Taylor, CFA, Bankrate.com advice columnistBuilding a credit history when you're young

Dear Dr. Don,
I turned 18 two months ago. My dad and I have talked about me getting a credit card to build up my credit score. I was wondering what a person, who just turned 18 with no credit, should do to begin building good credit.

I read a lot of articles and they all say that loans from banks are a good way to build credit, but to get a loan I need credit, and to get a credit card, I need better credit than what I have.

What type of credit would take on the risk of an 18-year-old, and what would be the best type to go with?
-- Jason Jump-start

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Dear Jason,
An easy solution is to get your father to list you as an authorized user on his credit card(s). With that approach you get to piggyback on his payment history while building your own.

This presumes that your father has a good credit history, that he'd be willing to list you as an authorized user and that the credit card company reports the payment history for nonspousal authorized users. The firm has to report the payment history when the authorized user is a spouse, but it is at the lender's discretion for other authorized users.

Another alternative is for you to get a secured credit card. In general, with a secured credit card you put money on deposit and that deposit serves as collateral against your credit card purchases. You'll need to check with the credit card provider here, too, to make sure that your payment history will be reported on your credit report.

The typical secured credit card has a line of credit available that's equal to the amount on deposit. You can shop for secured credit cards using Bankrate's credit card search feature.

If you're a student, you can also look into credit card offers marketed to students. They're geared toward someone that doesn't have much, if any, credit history. The Bankrate credit card search can also help you compare student card offers.

It's easy to misuse credit, especially for someone with his or her first credit card. Keep your spending in check. Don't look at the card as additional money. It's not, it's just a different method of payment in spending your money.

To ask a question of Dr. Don, go to the "Ask the Experts" page and select one of these topics: "financing a home," "saving & investing" or "money."

Bankrate.com's corrections policy-- Posted: Jan. 16, 2007
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