How Old Do You Have to Be to Get a Credit Card?
Explore the requirements for credit card eligibility and find practical approaches to establish and manage your credit effectively.
Credit cards offer a convenient payment method and are a foundational tool for building a financial history. Responsible use helps establish a positive credit profile, beneficial for future financial endeavors like securing loans or renting an apartment.
The Minimum Age Requirement
In the United States, the minimum age to apply for a credit card independently is 18 years old. Federal law, specifically the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009, introduced stricter rules for young applicants. This legislation mandates that individuals between 18 and 20 years old must demonstrate independent income sufficient to make payments, or have a co-signer on the account. The CARD Act was enacted to protect younger consumers from accumulating excessive debt by requiring card issuers to verify their ability to repay.
Once an individual reaches 21 years of age, the restrictions regarding independent income or a co-signer are lifted. At this age, applicants can include household income to which they have reasonable access when applying for a credit card.
Options for Young Applicants
Individuals who are under 21 or do not meet the independent income criteria have alternative pathways to access credit. One common option is becoming an authorized user on another person’s credit card account. An authorized user receives a card linked to the primary account but is not legally responsible for the debt incurred. This arrangement can help build credit history if the primary cardholder’s activity is reported to credit bureaus and they manage the account responsibly with on-time payments and low balances.
Another option is a co-signer. A co-signer applies for the credit card with the primary applicant and shares legal responsibility for the debt. This means if the primary cardholder fails to make payments, the co-signer is obligated to cover the balance. While co-signing can help someone qualify for a card, many major credit card issuers do not commonly offer this option, though exceptions exist for some student credit cards.
Building Credit History
Once a credit card is obtained, using it responsibly is essential for establishing and improving a credit score. A credit score is a numerical representation of an individual’s creditworthiness, influenced by five factors. Payment history is the most significant factor, accounting for about 35% of a FICO Score. Making all payments on time consistently demonstrates reliability to lenders.
The amount of debt owed, also known as credit utilization, constitutes 30% of the score. Keeping credit card balances low relative to the available credit limit, ideally below 30%, is beneficial for this factor. The length of credit history, which considers the age of accounts, accounts for around 15% of the score. New credit inquiries and the types of credit used, such as a mix of revolving credit (like credit cards) and installment loans, make up the remaining percentages.
Types of Starter Credit Cards
For young adults or those new to credit, specific types of credit cards are more accessible and designed to help build a credit history. Secured credit cards require an upfront cash deposit, which becomes the credit limit for the card. This deposit acts as collateral, reducing the risk for the card issuer and making these cards easier to obtain for individuals with limited or no credit history. Responsible use, including on-time payments, can lead to the return of the deposit and potentially an upgrade to an unsecured card over time.
Student credit cards are another option, specifically tailored for college students. These cards have more lenient approval criteria, recognizing that students may have limited income or credit history. While they may come with lower credit limits and sometimes higher Annual Percentage Rates (APRs), some offer features like cash back rewards or other benefits relevant to student spending habits. Consistent and timely payments on a student credit card can effectively help build a positive credit history.