How Old Do You Have to Be to Get a Credit Card?
Understand the age-related nuances of getting a credit card and begin building your financial standing responsibly.
Navigating the world of credit can be a significant step toward financial independence, particularly for young adults. Many individuals seek to understand the requirements for obtaining a credit card, often with the goal of establishing a credit history. This process involves understanding age-related regulations and exploring various card options available.
Understanding Age Requirements
Federal law sets a minimum age of 18 years old to open a credit card account independently. The Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 introduced specific provisions for applicants under the age of 21. This legislation mandates that individuals in this age group must either demonstrate independent means of repaying the credit or have a co-signer.
Independent income, for credit card application purposes, refers to verifiable funds from sources such as employment, scholarships, or grants. It can also include consistent, verifiable allowances. Individual credit card issuers may implement additional criteria or stricter income thresholds based on their own risk assessments.
Navigating Credit Card Options Under 21
For individuals under 21 who may not meet the independent income requirement, several pathways exist to begin building credit. One common option is becoming an authorized user on another person’s credit card account. As an authorized user, an individual receives a card and can make purchases, but the primary account holder retains full responsibility for all payments and the overall balance. This arrangement helps an authorized user establish a credit history, as the primary account holder’s responsible payment behavior is reflected on their credit report.
Another avenue involves a co-signer, an individual who legally agrees to share responsibility for the debt. A co-signer has a strong credit history and income, which can help the primary applicant get approved for their own card. While this option provides a direct path to building individual credit, it creates a shared legal obligation, meaning the co-signer is liable for payments if the primary cardholder defaults. Many major credit card issuers do not offer co-signed credit cards, making authorized user status a more widely available alternative.
Secured credit cards offer a distinct opportunity for those with limited or no credit history. These cards require a cash deposit, which serves as the credit limit and acts as collateral for the issuer. This deposit minimizes risk for the lender, making secured cards more accessible. With consistent, on-time payments, secured cardholders can build positive credit, potentially enabling them to qualify for an unsecured card in the future.
Student credit cards are designed for college students, featuring more lenient approval criteria than standard cards. These cards require proof of enrollment in a higher education institution. While they may have lower credit limits and potentially higher interest rates, student cards help young adults begin building credit. Applicants for student cards, especially those under 21, still need to show some form of income, which can include wages, allowances, or even residual scholarship funds after tuition.
Foundational Steps for Credit History
Once a credit card is obtained, responsible usage is important for establishing a positive credit history. Making on-time payments is the most important factor influencing credit scores, accounting for a significant portion of the score calculation. Paying at least the minimum amount due by the deadline consistently demonstrates financial reliability. Even a single late payment can negatively impact a credit score and remain on a credit report for several years.
Keeping credit utilization low is another important practice. Credit utilization refers to the amount of credit used compared to the total available credit. Financial guidelines suggest maintaining this ratio below 30% across all revolving accounts to positively influence a credit score. High utilization can indicate over-reliance on credit, potentially lowering a score.
Understanding the assigned credit limit is important, as it directly impacts the credit utilization ratio. Avoiding maxing out the card helps manage this ratio effectively. Regularly monitoring credit reports helps ensure accuracy and detect any potential errors or fraudulent activity. By law, consumers can obtain a free credit report annually from each of the three major nationwide credit bureaus through AnnualCreditReport.com.
Exercising caution with new credit applications is important. Each time a new credit application is submitted, a “hard inquiry” is placed on the credit report. While a single hard inquiry has a minor and temporary effect, multiple inquiries in a short period can have a compounding impact. Hard inquiries can remain on a credit report for up to two years, though their impact on credit scores diminishes after 12 months.