Author: Carrie Kirby / Source: Wise Bread
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Please visit our Advertiser Disclosure to view our partners, and for additional details.When my husband wanted to propose to me, we were just finishing up college. He went to a jewelry store at the mall and picked out the prettiest engagement ring he could reasonably pay for with a payment plan. He provided his Social Security Number for the credit check — but was disappointed to learn that his credit history was not long enough to qualify to buy the ring on credit.
If you’re a college student or around that age, you may not realize how important credit will be in your adult life. Probably a diamond ring isn’t the smartest thing to buy on credit anyway. (He ended up proposing using a ring that some student had made in art class and left behind, and I cherish it.) But you’ll need an established credit history to rent an apartment without a co-signer, get a car loan, refinance your student loans, or buy a house. And a credit card is a good place to start building credit.
So take these steps to get started on a lifetime of high credit scores and clean credit reports.
1. Make sure you’re old enough
I was only an 18-year-old college freshman when I signed up for my first credit card in exchange for a free bottle of soda.
But that was before the passage of the Credit CARD Act of 2009. That regulation sets the minimum age for getting your own account at 21, unless you can prove that you have sufficient income to pay off a credit card or you can get someone to help you in one of the ways outlined below.2. If you’re not old enough, start with a partner
There is an argument for getting started as soon as possible, even before age 21, as long as you are mature enough to handle a credit account. That argument is that 15 percent of your credit score is based on the age of your accounts. This means that even when you’re 50, your credit score might be a tiny bit lower if you put off opening your first card until age 25 instead of getting right to it at age 21 — or 16.
If you are under 21 and do not have a regular source of income, there are several ways that a parent with established credit can help you get a card.
Become an authorized user
This is a baby step toward using credit, one that I’ve even entrusted my 13-year-old with. An authorized user gets a nice shiny card that they can present at the cash register to buy things, but the user has zero legal responsibility for paying the bill.
How could this help you build credit? When you are added as an authorized user to an account with a clean payment history, your own credit may benefit in several ways. The credit bureaus recognize that you have access to credit, and some of the cardholder’s good behavior may get attributed to you.
But keep in mind that their bad behavior could get recorded on your credit report as well. If your parent, older sibling, or girlfriend has a history of missed payments or accounts in collections, getting an authorized user card on their account will not help you.
Since the bills will be going to your parent or whoever else made you an authorized user, you’ll have to come to an agreement with them whether you must pay them back for the charges you incur. Some parents who would have otherwise sent their kids cash at college simply set a limit on how much the student is allowed to charge each month, and pay the bill themselves.
Get a co-signer
If a parent cosigns for a credit card account with you, it means that you are both equally responsible for paying the bill, and the payment record will show up on both of your credit reports. If your goal is to build up a record of on-time payments, getting and conscientiously using a card with a co-signer can achieve that.
Adults who cosign with their kid should be warned that if the kid doesn’t make the payments, the parent’s credit could suffer — and the card issuer may not notify you that the kid isn’t making payments. When the minor turns 21 and is ready to fly on his or her own, you might be able to get the bank to remove the co-signer’s name from the account, or you might have to pay off the account and close it, then have the young adult open a new account on their…
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