My nephew turned 18 without reading the money book I'd given him, so I recorded a video of credit-building tips for him on his birthday. Credit matters more than it seems at 18. Your credit score helps decide the interest rate on your first car loan, your first mortgage, and every line of credit after that. On a $300,000 mortgage, one percentage point of interest costs about $3,000 a year in the early years. It's much easier to build good credit from the start than to fix bad credit later.
Start with one credit card. Apply for an unsecured card at a local credit union or bank. Unsecured means you don't have to put down a deposit. If you can't get approved, a secured card works too. You put down a deposit, usually equal to your limit, and the card works the same way.
Use it for small things and pay it off in full every month. Put a $10 or $20 charge on it, and pay the whole statement balance by the due date. If you always pay the full statement balance, you never pay interest. What you're building is a record of on-time payments, which is the biggest part of your score. A single late payment can stay on your credit report for seven years, so set up autopay for at least the minimum.
Keep the balance low. Try to keep what you owe under 30% of your limit, and under 10% is even better. On a $500 limit, that means keeping the balance under $150, and ideally under $50. How much of your limit you're using is called utilization, and it's the second biggest part of your score and the fastest one to change. What actually moves your credit score goes through all five parts.
Add more credit slowly. Once the first card has a few months of history, you can apply for another, and space your applications out over months. Each application causes a hard inquiry, which drops your score a few points for a while. And don't close old cards once you have them. A long history helps your score, so keep old cards open and put a small charge on each one now and then.
The fastest boost usually comes from a parent. If a parent has a credit card they've had for years and never paid late, ask them to add you as an authorized user. That card's long, clean history can then show up on your credit report too, which can add years of history to your report right away. You don't even need to use the card, and the parent keeps making the payments. The catch is that it works both ways. If the parent pays late or runs the balance up, that shows up on your report too. An authorized user doesn't owe the debt, which is different from cosigning, where both people are on the hook, and cosigning a loan makes it your loan explains that difference.
Once you have good credit, protect it. Treat the card like a debit card that happens to pay you rewards, which means you only charge what's already sitting in your bank account. Good credit makes borrowing cheap when you actually need to borrow, whether that's for a house, a car, or a line of credit you'll use to pay down debt faster.
If you're a parent reading this, pick your oldest card with a spotless payment history and call the issuer about adding your 18-year-old. Ask how soon it will show up on their credit report, and put a reminder on your calendar to check that it did.