There are many financial milestones in life — from getting your first job to opening your first bank account to applying for your first credit card.
Credit cards are one aspect of a diverse financial portfolio and learning how to use them early on can set you up to have healthy spending habits in the future.
Legal age vs. credit approval requirements
The minimum age for most credit card issuers is 18. However, getting a credit card at 18 isn’t easy for everyone. If you’re between the ages of 18 and 21, you may have a hard time getting approved for a standard credit card as most card issuers require a credit history and a good or excellent credit score to qualify.
You’ll also most likely need proof of income to show you can keep up with monthly payments. The exceptions to this rule are student credit cards and secured cards, which don’t require a credit history for approval.
How the Credit Card Act of 2009 changed the availability of credit
The Credit Card Act of 2009 marked a turning point for how credit card issuers could market their products and, in part, was put in place to protect young people from possible predatory lending practices.
Before the CARD Act, card issuers could market products toward young people. There was also no standard for credit card agreements to be clear and easily understood, leaving a lot of young people locked into agreements that lacked transparency.
The CARD Act makes it so credit card issuers can no longer market directly to young people and must clearly communicate the responsibilities of having a credit card. Title III of the CARD Act specifically states that issuers “soliciting to persons under the age of 21” must acquire an adult co-signer and proof that the applicant can pay their monthly bill or has completed a financial literacy course within their credit card application.
How to get approved for a card at 18 (or younger)
If you are 18 or younger and want to start building credit, there are ways that you can get access to a credit card without having to jump through too many hoops.
Become an authorized user
For one, you can become an authorized user on a parent, guardian or family member’s credit card in order to build your credit. The minimum age for an authorized user depends on the issuer, and some don’t require a minimum age. Those that do set the age somewhere between 13 and 16.
As an authorized user, you have access to the primary cardholder’s account (including their credit limit) and receive your own card, but you won’t have any legal obligation to pay the balance each month.
Get a co-signer
If you want to apply for a credit card with a co-signer, you first have to find an issuer who allows it. Most major issuers don’t allow for co-signers as it can be complicated to have two people responsible for one account.
When applying for a card with a co-signer, both applicants need to meet the credit score requirements for the issuer. For this reason, the minimum age to get a credit card with a co-signer is 18.
Additionally, by having someone cosign a credit card for you, they’re technically accountable for any debt you obtain that you cannot pay back.
Consider student or secured credit cards
Student credit cards are easier for young people to obtain as many issuers accept applicants with little to no credit history. In the same vein, secured credit cards are also open to people with no credit history, but are more like debit cards. In order to activate a secured card, you’ll have to put down a deposit that will serve as part or all of your credit limit.
With both student and secured cards, you are solely responsible for the account and monthly payments. For this reason, the minimum age for student and secured credit cards is 18.
When is a good time to begin building credit?
The best time to start building credit is when you feel like you can manage your spending and payments, and a great way to prepare for this responsibility is to start by opening a checking account. A checking account gives you practice with keeping a consistent balance and using your money responsibly.
Another marker that you’re ready for a credit card is having a stable income independent from your parents. Having your own income will provide you the funds you need to consistently pay off your credit card bill each month.
How credit works and the factors that make up a credit score
When you’re approved for credit of any kind, it means you’re able to borrow funds from an institution or utilize a certain financial product or service. When you begin to use credit, the activity on your accounts is reported to credit bureaus and shows within your credit report. Lenders then can reference your credit report and score to determine your ability to repay borrowed funds and the interest rate you’ll receive.
Your credit report documents your credit activity and credit score, with your credit score, in particular, representing your creditworthiness. Credit scores are determined by five main factors — payment history, credit history, credit utilization, new credit and credit mix — and can be categorized as bad, fair, good and excellent.
A bad credit score is typically considered to be 549 and below, while a perfect credit score is equal to 850. Having a score of 700 or higher will put you in the good to excellent range and offers the greatest possibility for credit opportunities and low interest rates.
The best credit cards for first-time cardholders
When you feel you’re ready to apply for your first credit card, there are some important things to keep an eye out for.
For starters, consider cards that are open to applicants with no credit history. The Petal® 2 “Cash Back, No Fees” Visa® Credit Card, for example, markets itself as a starter card that takes more than just credit history into account, but income and banking information, as well.
Second, look for cards that don’t charge an annual fee — meaning it won’t cost you to own the card. A great option to consider is the Deserve® EDU Mastercard for Students, which doesn’t charge an annual fee and offers 1 percent cash back on all purchases. And because it’s geared towards students, the card requires little to no credit history. Instead, Deserve looks at aspects of your financial history, such as bank account activity.