In the 1950s, 1960s and 1970s, most young people were not expected to establish their own credit until they were in their late 20s.  Today, teenagers and young adults often begin to establish credit early and this can serve you well, if you are cautious and do it the right way.

If your child is age 16-25 and you want to help them establish credit, or if YOU are age 16-25 and YOU want to establish credit, here are some things to think about before you begin the process:
 
It is difficult to get your own credit if you are under 21, but you can begin to establish credit by having a parent or guardian set up a checking account for you with checks, a debit card and possibly a co-signed credit card attached, if your bank will allow this addition.
 
By making deposits and withdrawals, paying minor bills you may incur by check when you are ordering from a catalogue or buying something at the store, or buying and paying things on credit from your own account, credit agencies will record YOUR name and begin to track YOUR credit.
 
One important note here:  If you are opening an account in your name, your parent will have to co-sign, and that is fine.  You can still hold the primary account name and begin your credit journey.  Just be sure you don’t open the account as a trust account or under a Gift to Minors Act in your state.  These accounts consider the parent or guardian as the primary and no incoming or outgoing money will apply to YOUR credit. 
 
Parents should take note that if a child is still in high school or college, you are ultimately responsible for their bills if they do not pay them.  So, track any money they earn through part time jobs or monies they put in the bank from gifts, etc.  Be sure you know what they are charging and spending and help your child establish good budgeting and personal financial habits. 
 
If you are over 21 and you do not have credit, you want to begin this process as soon as possible.  You may wish to buy a car on credit or rent an apartment or buy something larger like a boat, or even charge a vacation you plan to take when you graduate from grad school.  You can start as an ‘additional cardholder’ on your parent or guardian credit card account.  You will get your own card and you can have bills sent to your address if you do not live at home. 
 
The only time your parent or guardian will have to get involved is if you do not pay your bills.  Don’t let that happen.  That will have a negative impact on your new credit rating.   If you can get a credit card that requires full payment at the end of each month, you are better off.  The idea is to charge and then pay the bill right away to establish good credit. 
 
Cards that allow you to carryover charges are too tempting and you can easily rack up a very high bill and find yourself unable to pay the high interest rates.  Once you have established 12-24 months of good credit, you can contact the same credit card company with whom you have the ‘extra cardholder’ relationship and complete an application to get your own credit card account.  Remember, it is never too early

 

  

 

 

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