how to get credit at 18 years old

getting credit when you just turn 18 years old can be a challenge, or getting approved for a car loan at 18 years old. As young people we often face the challenge of trying to establish our credit when we have no credit. Often lenders will give the decline stating “no credit to rate” or “co signor needed”. It can be frustrating to hear. I would suggest going to your own bank for a starter credit card. Of course your bank will be looking to see your account history and how active your account is. Some items your bank will be looking at in order to make a decision on your application will be”

  1. How long you have had your account with them
  2. Whether you are employed or not, and for how long
  3. Any negative items on your account (NSF, bounce cheques, etc)
  4. Any relevant history in your account to allow them to make a decision.

I would suggest having a steady job prior to applying would be a good idea. Most lenders will want 2 years employment history. If you just turned 18 and have 2 years of part time, or 2 years of income earning than this is information you will want to supply them with when you apply for a starter credit card. At a minimum, most lender will want 6 months employment history, earning enough to support the limit on the credit card you are applying for. In my opinion, it would be wise to apply for a $1000 limit to start. If the bank offers $500 at the start then this can work as well, but you will want to manage that card and try to get to the $1000 limit as fast as possible. In my opinion, lenders will look at a $1000 limit more favourable than a $500 limit. I am,of course, talking about 1 single trade line, and for an 18 year old person.

It is my opinion that most banks will approve their 18 year old clients for a $500 or $1000 credit card, as long as they have employment, and no negative history on their bank account.

Applying for a car loan for no credit can be a challenge as well. Their are lenders available that will approve an 18 year old for credit, with no cosigner. The rate offered could depend on the lender, but their are lenders that will offer car loan approvals for no credit, that are open ended(can be paid off early with no penalty). With no credit car loans in Canada, the lender needs to assess each client with a “risk score”. This would be the lender looking at the client profile and determining the risk involved in approving, and for what rate. with applicants that are just 18 years old, the lender has no prior history to give a risk score from, so they need to rely simply on vehicle selected, money down, and age of client. It would be my opinion, as an 18 year old applying for a car loan, to be realistic. The vehicle selected should be treated as a credit building tool. My opinion would be to keep the vehicle as cheap as possible, and bring some down payment to the deal. You will want to give very reason for the lender to say “yes”. It is much easier to manage a $10,000 car loan than a $17000 car loan. It is much easier to make extra payments on a small monthly payment, then it would be on a maximum monthly payment.

My suggestion would be to “shop within your means” or “purchase with a realistic outlook”.

As an 18 year old your credit future will always depend on how you start your credit off. Credit management starts at 18, and you will always be in control of your credit future.

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Just my 2 Cents

-M

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