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Advice

The best thing you can do for your credit in your 20s

Your 20s is the perfect time to start building a credit history. Here's why it's important and how to get started.

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Your 20s signify a decade of many changes: graduating college, starting your career, moving into your first apartment. With so much to juggle and a lot of adapt to, it's easy to feel like the years fly by.

But while you're young it's important to carve out time to establish a strong financial foundation. More than just learning the dos and don'ts of saving and spending, you should also understand the importance of credit.

Having good credit will open many doors for you down the road, such as qualifying for the lowest interest rates on a new car loan or a future mortgage on your first home. Though the latter may seem far away, the earlier you start building credit the better. In fact, your credit history — or the length of time you've had credit — makes up 15% of your credit score.

The easiest way to do build credit, and the best thing you can do for it in your younger 20s, is to open a credit card and pay off anything you charge on it in full by every monthly due date.

When you pay off your balances completely by the time they are due, your credit report will show that you are capable of paying back what you borrow and don't spend above your means. Lenders and issuers will then see you as less of a risk to lend money to and it will be easier to qualify for more credit in the future.

Learn more: A stress-free guide to credit cards: How to use them responsibly

The best credit cards to help you get started

There are credit cards made for all types of consumers, even newcomers.

While beginners shouldn't expect a high credit limit on their first credit card, note that good payment habits can keep you on track to graduate to a card with higher spending limits.

Since you have very little credit history starting out, the credit cards you'll be able to most easily qualify for are called secured credit cards. These cards differ from traditional, or unsecured, credit cards in that they typically require cardholders to make a security deposit upfront that is equivalent to their credit limit. This deposit, which is usually $200, acts as collateral in case you don't pay your bills each month. The good news is that many issuers let you graduate to a traditional credit card once you show you can use a secured card responsibly.

A basic secured card with one of the lower interest rates (if you carry a balance, which we don't recommend) is the Citi® Secured Mastercard®. With a 22.49% variable APR, it's your best low-interest option from a major bank. Though there is the typical $200 security deposit upfront, this card comes with no annual fee.

Citi® Secured Mastercard®

Citi® Secured Mastercard®
Information about the Citi® Secured Mastercard® has been collected independently by CNBC and has not been reviewed or provided by the issuer of the card prior to publication.
  • Rewards

    This card doesn't offer cash back, points or miles

  • Welcome bonus

    No current offer

  • Annual fee

    $0

  • Intro APR

    N/A for purchases and balance transfers

  • Regular APR

    22.49% variable on purchases and balance transfers

  • Balance transfer fee

    $5 or 3% of the amount of each transfer, whichever is greater

  • Foreign transaction fee

    3%

  • Credit needed

    No credit history

See our methodology, terms apply.

Pros

  • No annual fee
  • $200 refundable deposit
  • Flexibility to change your payment due date

Cons

  • No rewards program
  • 3% foreign transaction fee

Not all secured cards require as much as $200 upfront. If you have a good enough credit score, you may qualify for a lower deposit of $49 or $99 while still receiving the $200 credit limit with the Capital One® Secured. The card also has no annual fee and grants cardholders access to a higher credit limit after making the first five monthly payments on time.

Capital One® Secured Mastercard®

Capital One® Secured Mastercard®
Information about the Capital One® Secured Mastercard® has been collected independently by CNBC and has not been reviewed or provided by the issuer of the cards prior to publication.
  • Rewards

    This card doesn't offer cash back, points or miles

  • Welcome bonus

    No current offer

  • Annual fee

    $0

  • Intro APR

    N/A for purchases and balance transfers

  • Regular APR

    26.99% variable on purchases and balance transfers

  • Balance transfer fee

    None

  • Foreign transaction fee

    None

  • Credit needed

    No credit history

See our methodology, terms apply.

Pros

  • No annual fee
  • $49, $99 or $200 refundable deposit
  • Get access to a higher credit line after making your first five monthly payments on time
  • No fee charged on purchases made outside the U.S.
  • Flexibility to change your payment due date

Cons

  • High 26.99% variable APR
  • No rewards program
  • After you apply and submit your deposit, it takes 2-3 weeks to get your card
  • Capital One periodically reviews your account to see if you can be transitioned to an unsecured card, but unlike the Discover it® Secured Card there’s no clear timeline for when this will occur

And if you are a student currently enrolled in school or planning to go back, college student credit cards can be an even better choice because they are specifically catered to your spending. Some ofer rewards on supermarket purchases, like with the Citi Rewards+℠ Student Card, and others are open to applicants with no credit history whatsoever, like the Deserve® EDU Mastercard for Students.

See CNBC Select's ranking of the best college student credit cards here.

Learn more:

The 5 common credit mistakes you should avoid in your 20s

Ex-Wall Street titan Sallie Krawcheck shares the No. 1 recommended savings habit for people in their 20s

6 smart money moves to make in your 20s that can help you save money

Information about the Citi Rewards+℠ Student Card, Capital One® Secured, and Citi® Secured Mastercard® has been collected independently by CNBC and has not been reviewed or provided by the issuer prior to publication.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the CNBC Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.