You’re an adult now. You’re trying to push away from the financial support of your parents and forge an independent path. You have income being deposited into your checking account. You have some money sitting in a savings account. Now, all you need is a credit card.
Well, unfortunately, getting your first credit card might not be that easy. The CARD Act of 2009 states that credit card companies cannot offer credit cards to young adults of a certain age. If you are under the age of 21, you won’t be able to apply independently for this type of account — even though you are legally an adult. If you are between the ages of 18 and 20, this news could feel like a huge blow. How are you supposed to build your credit now?
Don’t worry. There are a few options that are still available to you.
Getting a Cosigner
Young adults under the age of 21 may not be able to get approved for their first credit card independently, but that doesn’t mean that the credit tool is completely unavailable to them. Young adults of this small age bracket have the option of applying for a credit card with a cosigner. The safety net of a cosigner can increase your likelihood of getting approved.
What Is a Cosigner?
A cosigner is a person who agrees to legally take responsibility for repayment when the primary accountholder fails to do so. So, if you default on your loan payments, your cosigner will be obligated to pick up the slack for you. They have agreed to a financial backup plan.
Cosigners are often trusted family members. If you’re interested in having your own credit card, you should discuss the possibility of cosigning with your parents/guardians. They might be willing to take on the responsibility so that you can start building your credit experience.
Becoming an Authorized User
You might not need to apply for a brand-new credit account. You might be able to join an existing credit account as an authorized user. As an authorized user, you would have a personal copy of the card with the same numbers and passwords. You could use your card to charge transactions to the line of credit, as long as it’s within the predetermined limit. You could also make monthly payments by the billing cycle’s due date and trim down the outstanding balance.
Being an authorized user would allow you to gain credit experience without an independent account. Your credit card activity will also be supervised by the primary user (likely a parent or guardian), which could keep you accountable and responsible with your credit use. You might not be as tempted to go overboard and make a serious mistake like maxing out your card.
Looking Beyond Credit Cards
A credit card isn’t the only way that you can build up your credit. For instance, if you have an emergency expense that you need to cover, but you don’t have enough in your savings account to pay it off, you could try to apply for a personal loan online.
An approved personal loan could provide you with enough temporary funds to resolve your emergency in a short amount of time. It should only be used for emergency purposes — not everyday expenses, like groceries. Discover some of what you need to know about online loans before you fill out an application. You’ll want to make an informed decision.
Another type of loan that could help you build up your credit is a student loan. So, if you’ve signed up for student loans to pay for your college tuition, then you’re in luck.
How do these loans help build credit? Loan repayments go toward your credit history. So, after you use a personal loan or a student loan, you will need to follow a steady repayment plan. As long as you make your repayments on time, you should be able to tackle the responsibility and gain credit experience.
You might not have a lot of options for accessing credit when you’re this age. But don’t worry, you still have some options that’ll give you a head start on your credit experience!