Many young adults reach their 20s with little or no credit history. That makes everything—from renting an apartment to getting a loan—harder and more expensive. Without a good score, you’ll likely pay higher interest or even get turned down for credit. The upside is that Gen Z has powerful digital tools at hand. With mobile apps and new fintech credit cards, 18–25-year-olds can establish a strong credit history digitally and early.
Not having established credit can be costly. Lenders charge higher rates to individuals with poor or no credit history. Auto loans for subprime borrowers often carry annual interest rates exceeding 25%, and car insurance premiums can be double those of good-credit drivers. Even renting a place or landing a certain job can be tough without a credit history. If you carry poor or no credit into your late 20s, expect to pay thousands more in interest over your life. Building credit early can save a lot of money.
A credit score is a number (usually 300–850) that shows how reliable you are at paying back borrowed money. Banks and credit card issuers use it to decide if you qualify for loans, credit cards, or apartment leases. A high score means you pay less interest; a low score or no score makes even a small loan expensive.
A quick way to build history is to become an authorized user on a parent’s or relative’s credit card. When someone with good credit adds you to their account, you get a card of your own linked to their account. All purchases and on-time payments made with that card will then appear on your credit report as well. Experian explains that your score immediately benefits from the account’s history—it boosts both your payment history and the age of your accounts. This is a low-risk method if you trust the cardholder and they have a proven track record of making timely payments. (Don’t confuse this with paid “piggybacking” services; paying strangers to add you is risky and often frowned upon.)
Secured cards work like regular credit cards but require a cash deposit as collateral. If you put $500 down, your limit is $500. The card issuer reports your activity to the credit bureaus just like any other card. As long as you pay the balance in full each month, those on-time payments build your credit. Many banks offer secured cards for people with limited credit history.
For example, Chime’s Credit Builder Visa doesn’t require an upfront deposit at all—instead, you move funds from your Chime checking account into a secured account to set your limit. Chime reports every on-time payment to all three bureaus and charges no interest or fees. In short, secured cards (even no-fee fintech versions) are a safe way to practice responsible credit use and build your score.
If you’re in college or a recent graduate, student credit cards are designed for you. These cards usually require proof of school enrollment (or income/cosigner if under 21) and often come with no annual fee. They tend to have moderate limits and educational perks. Many offer rewards on everyday spending.
For example, Discover’s student cards give 5% cash back in rotating categories or 2% at gas and restaurants, plus 1% on all other purchases. Discover even runs a Good Grades program: students who maintain a 3.0 GPA get an extra $20 cash back each year, up to five years. These perks can motivate good habits. However, pay off the statement balance in full every month to avoid interest.
A credit-builder loan is a specialized, small loan designed to help individuals build or establish credit. With this product, the lender holds the money you borrow in a bank account (like a savings account or CD) while you make payments on it. You do not receive the cash upfront. Instead, each month you make a fixed payment (with a small interest) on the loan. Once it’s fully paid, the money is released to you.
Meanwhile, the lender reports those monthly payments to the credit bureaus. These loans are usually for modest amounts (often $300–$1,000). If you pay on time, it creates a perfect record of consistent payments. A credit-builder loan forces you to pay down a loan on time and lets you keep the loan proceeds at the end. For someone with no credit history, this can be particularly powerful, as it demonstrates your ability to handle an installment loan. Watch for interest rates and any fees.
Some apps target teens and young adults with built-in credit building. For instance, the Step banking app offers a Visa card for teens (with a parent co-signer) that acts like a secured card. Step advertises that you can “start building credit history—even before you turn 18!”.
Your Step card transactions are automatically paid and reported to the credit bureaus, so responsible use helps build your credit score. Step is also fee-free. Similarly, Chime’s Credit Builder (mentioned above) is designed for easy credit building with no fees. These fintech options let tech-savvy young people use apps instead of paperwork to boost their credit.
Fintech innovators have developed cards for individuals with limited or no credit history by utilizing non-traditional data sources. Petal and Tomo are examples. Petal’s Visa utilizes a machine-learning underwriting model, which considers your income, savings, and spending habits in addition to your credit score. Petal 2 (the newer version) requires no security deposit, has no annual fee, and even offers cash back. It reports to all three bureaus, letting responsible use grow your score.
Tomo Credit Card went further: it charged no interest or fees (just a small membership fee) and never did a hard credit check. Instead, Tomo checked factors like your income and bank balances to approve you. The catch is that Tomo is invite-only now, but it paved the way. In short, these cards are “designed to build credit,” especially for those new to credit. Be sure to pay off balances fully, as these cards typically don’t carry balances from month to month, thereby eliminating interest risk.
Fintech tools aren’t just cards—they also include services that add alternative data to your credit file. A key example is Experian Boost. With Boost, you link your bank account, and it automatically adds on-time payment history for things like phone, internet, utilities, and even some streaming subscriptions to your Experian credit report. (This only affects your Experian-based score, not the others.)
Likewise, paying rent on time usually doesn’t help credit, unless you use a rent-reporting service. Some services (including Experian Boost’s rent feature) can report your rent and utility payments to the bureaus. In short, by digital means, you can turn everyday bills into credit-building events. This is especially helpful if you have limited other credit: positive bill payments demonstrate to lenders that you’re reliable, even without a loan or credit card.
Always pay at least the minimum on each credit account by the due date. One late payment can significantly harm your credit score. Use autopay or set reminders on your phone calendar to ensure nothing slips through. Remember: On-time payments account for approximately 35% of your score. If you’ve got a card, set it to auto-pay now or mark each due date in your calendar with an alarm.
Try to use no more than 30% of each card’s credit limit. For example, if your card limit is $1,000, keep your balance under $300. Lower is even better. High usage looks risky to lenders. The credit model assigns approximately 30% of its weight to the amount of credit you’re using. Pay your balance before the end of the month so your reported balance is always low. This shows you aren’t relying too heavily on your credit line.
Healthy finances feed healthy credit. Create a simple budget by listing your income and every expense (rent, food, transportation, etc.). Use free tools like Mint or other budgeting apps to track your spending. Seeing where your money goes helps you spend less than you earn.
Save a portion of each paycheck into a small emergency fund (even $500–$1,000) so you don’t have to put unexpected costs (such as car repairs or medical bills) on a credit card. That way, you avoid sudden high balances or missed payments. In short, live within your budget and save for unexpected expenses. Many apps can help you automatically categorize spending and alert you when you’re near your limit.
Free credit-monitoring apps allow you to track your credit score and report for any changes. Good apps offer real-time alerts if your score moves or a new account is opened in your name. Apps usually show you your full credit report and flag any irregularities (like unknown accounts or inquiries). Many will also include identity theft protection and education tips. For example, Experian and Credit Sesame are popular choices. Install one of these, and you’ll get pinged whenever something important happens with your credit.
A second layer of tools is personal finance or banking apps that monitor cash flow. Beyond credit scores, apps like Mint, YNAB, or your bank’s app can send spending alerts and monthly summaries. They can notify you when bills arrive or if you exceed set spending categories. According to experts, apps like Mint or Goodbudget automatically import transactions and track recurring bills, helping you stay on budget. Use any app you prefer on your phone to always have a snapshot of where your money is going.
Turn on autopay for all your bills (including credit cards, utilities, phone, and even subscriptions). If you set up an automatic payment through your bank or card app, your bill will be paid by the due date every month. This eliminates late payments. Also, put manual reminders in your calendar a week before any bill is due. Just a quick phone alert can be the difference between paying on time and being late.
Every time you apply for credit, the lender does a “hard inquiry” on your credit report. Each hard pull can ding your score a few points. Applying for multiple cards or loans within a short period may significantly lower your credit score. Credit experts give new credit just 10% weight, but that 10% can swing a few points if you stack applications. Apply only when you truly need a new card or loan. Stagger any applications by several months. This way, you avoid multiple inquiries that could label you a risky borrower.
You might think paying off a card and closing it is a smart move, but that can hurt your credit score. When you close a credit card, you shrink your total credit limit and shorten your credit history. Both effects can raise your utilization rate and lower the average age of your accounts. Closing accounts can reduce your score. The safer move is to keep paid-off cards open and use them occasionally for small purchases. Just pay them off monthly to avoid interest. This way, you preserve your credit line and history.
A common misconception is that using a debit card helps build credit. It doesn’t. Debit cards are not reported to credit bureaus because they are not credit. No matter how much you spend on debit, it never appears on a credit report. Many Gen Zers rely on debit simply because they don’t have credit yet. Young consumers haven’t established credit, which in turn prevents them from accessing cards with real rewards. If you want credit, you must use credit, meaning cards or loans. Be careful not to confuse the two. Use a debit card for everyday expenses if that’s easier, but remember that you won’t build any credit history that way. Once you have a card, treat it like cash.
Some colleges let you pay tuition with a credit card. This can be a clever move if your school does not charge a fee. The Points Guy found that schools fall into three categories: those that forbid card payments, those that accept them with no additional fee, and those that charge an extra fee (often around 2–3%). If your school allows fee-free credit payments, using your rewards card for tuition is a no-brainer—just be sure you can pay the balance right away to earn those points or cash back. If there is a fee (for example, a 2.75% service charge at some schools), do the math: sometimes the points are worth it, but often you’ll come out about even after the fee.
Believe it or not, good grades can put money in your pocket and help your credit. Discover’s student cards (mentioned above) let students earn a $20 bonus each year they maintain a 3.0 GPA or higher. That’s extra cash just for hitting the books! There are also “study partner” programs and campus leadership cards offered by some banks or credit unions that reward financial literacy or volunteering.
These programs and perks remind students that credit companies do pay attention to responsible young customers. The key is to read the fine print on any student offer: use the card responsibly, and take advantage of any GPA, cashback, or startup bonuses. These little extras can give you a small boost while you build big habits.
Building credit as a young adult means taking many small steps now for large benefits later. Start with safe products and consider credit-builder loans if you need them. Use the new digital tools to make the process easy. Pay every bill on time and keep balances low. Avoid credit myths: debit cards and closing accounts won’t help. Remember, having poor or no credit will cost you a significant amount of money in the long run, primarily through higher interest rates.