Photo (cc) by Philip Taylor PT
A Money Talks News reader recently sent me the following question:
I recently turned 18 years old and I’m eager to get approved for a credit card, not to go on a shopping spree but to start building credit. Am I old enough to get approved for a credit card? — Joey F.
Before the Credit CARD Act of 2009 was passed, the answer to this question used to be a lot simpler. It was rather easy to get approved for a credit card as long as you were 18 or older and didn’t have any egregious blemishes on your credit profile.
Nowadays, the answer is essentially “yes” and “no.”
While the Credit Card Accountability, Responsibility and Disclosure Act was, by and large, highly beneficial to consumers, it makes it plenty more challenging for those under 21 years of age like Joey to start building credit.
In accordance with the CARD Act, consumers under 21 must either have a co-signer or show proof of sufficient income in order to get approved for a credit card. There’s no defined standard for “sufficient,” but some proof is required to show that you can make monthly payments on a credit card.
So while it’s a little more difficult to get approved for a credit card, it’s certainly not impossible.
You could, of course, convince your parents to act as a co-signer on your application. It’s normal for them to seem hesitant given the risks involved: Any payments you miss show up on their credit reports too. But if they’re cognizant of how important it is to build credit early and you have a track record of responsibility, then perhaps they’ll get on board.
If you’re a student with parents generous enough to co-sign on your first card, a handful of very good student credit cards are available. Some — like the Discover it Card for Students and the Citi Dividend Card for College Students — even offer bonus cash-back programs for credit newbies who are still in school.
It’s also worth considering a secured credit card through your bank. Secured credit cards can be kind of tricky for the 18-year-old crowd without much income because they require a deposit to get started — usually anywhere from $200 to $500. This deposit essentially protects the bank in case you default. Secured cards are proven credit-building tools, their security deposits are fully refundable, and their interest rates are much lower than some unsecured cards for first-time credit consumers.
All banks have different standards of approval, so sit down with your bank to determine if you’re likely to get approved for its secured credit card option.
Finally, if you’re more interested in building credit than actually carrying a credit card (unlikely, but possible), find out what your parents’ credit situation is and have a conversation with them about adding you as an authorized user on one of their cards. For instance, if your parents have one (or multiple) accounts in good standing, adding you as an authorized user essentially passes on their good credit habits to your profile.
The catch is that some credit card issuers don’t actively report authorized users to credit bureaus, so you’ll want to verify this with the company first before applying as an authorized user. This isn’t the ideal way to build credit, but it’s a credible last option if that’s where you find yourself.
Overall, Joey is right in that it’s extremely important to build credit early. The longer your credit history, the better. That said, it really depends on a consumer’s situation as to whether or not they’re likely to get approved for a card under 21 years of age. The best thing to do is weigh the above options, get more information on possible credit cards available to you (secured, student, etc.) and determine which path makes the most sense in building your credit history early.
So, yes, you can get approved for a credit card if you’re 18. You just might need a little help along the way.