Establishing healthy credit early in life is invaluable, as it lays the foundation for financial stability and access to essential financial tools in the future. However, the Credit CARD Act of 2009 places strict restrictions on credit card access for young adults under 21, making it more challenging for younger students to start building credit independently.
The Act requires individuals under 21 to have a steady income or a cosigner to qualify for a credit card. While some credit card companies permit a cosigner, which can be a parent or guardian, to help a student under 21 qualify for a card, this practice is not the standard. In fact, some major credit card issuers do not allow cosigners to access their student credit cards, including Discover.
For young adults aged 18 to 21, getting a credit card is still within reach, despite some protective measures. The Credit CARD Act of 2009 aims to shield young people from harmful credit practices but also provides clear paths to acquiring a credit card. Here’s the straightforward breakdown:
Keep in mind that credit card companies vary in their requirements. While some may offer the possibility of applying with a cosigner, many do not. For young adults without a cosigner, proving sufficient independent income becomes the key to obtaining a credit card.
If you're considering cosigning for a student credit card, you need to meet specific criteria along with the primary applicant. As a cosigner, you're expected to have a more established credit history and take responsibility for the debt if the primary cardmember doesn't make payments. Typically, eligible cosigners are parents, legal guardians, or spouses who have a good credit score and stable income, ensuring you're financially capable of covering any potential liabilities.
Beyond these relationships, if you're an adult with a solid credit history and demonstrate the ability to manage credit effectively, you typically can also be a cosigner, if the credit card issuer allows for one. It's crucial for you to understand that your credit will be equally affected by the account's activity. This highlights the importance of using credit responsibly and making payments on time.
Becoming a cosigner on a student’s credit card is a big responsibility. When you agree to cosign, you're promising to pay off the card if the student can't. This means that whatever happens with the card — whether it's good or bad — affects both your and the student's credit scores. If payments are missed, or if there's a lot of debt on the card, it could harm both of your credit histories.
It's important for you to be careful as a cosigner. You should monitor the account to make sure it's being used responsibly and that payments are made on time. Before you agree to cosign, it's a good idea to talk with the student about how to use the card wisely. Remember, cosigning isn't just about helping them get a credit card; it's about taking on shared responsibility for how the card is used and making sure it's paid off properly.
A cosigner on a student credit card is usually needed until the student can handle the card independently. This often happens when:
You usually need to keep a cosigner on your student credit card until you show you can manage your finances and credit well. Once you prove you’re reliable with payments and have a steady income, it may be possible to request to remove the cosigner from your account.
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If you find yourself struggling to qualify for a credit card on your own and find that a cosigner option isn't available — since not all credit card issuers, including Discover, allow cosigners — don't lose hope. There are still practical ways to start building your credit.
One such method is through a secured credit card. This type of card requires you to make a cash deposit upfront, which typically becomes your credit limit. Another strategy is to become an authorized user on another person's credit card. This arrangement lets you piggyback on the primary cardmember's credit history.
Both options provide a pathway to build credit, especially when getting a cosigner is not an option. By taking a responsible approach to credit and choosing the right financial tools, you can lay the groundwork for a solid credit history.
A secured credit card may be an excellent option if you don’t have established credit. Unlike regular credit cards, a secured card requires a cash deposit from the cardmember, which typically becomes the credit limit. This deposit means less risk for the card company, so it may be convenient to get this type of card if you have no credit or bad credit. Secured credit card activity is reported to the major credit bureaus, so as you use the card and pay your bills on time, you start building your credit. Some card issuers, like Discover, allow you to get your deposit back after six consecutive on-time payments and six months of good status on all your credit accounts. 2
A secured card is different from other ways to build credit, like joint accounts, cosigners, or being an authorized user on someone else's card. With a secured card, it's all on you – the credit you build is based on how you use the card. For example, the Discover it ® Secured Credit Card helps you build your credit history with responsible use. 1 Secured credit cards require a deposit, which acts as your credit limit. Your credit line will equal your deposit amount, starting at $200. 4 If you default on your payments, the deposit serves as collateral. And by creating smart habits, like making on-time payments, you could eventually qualify for an unsecured credit card, which may further strengthen your credit history. And there’s no credit score required to apply for a Discover it ® Secured credit card. 5
Being an authorized user on someone else's credit card may be an option to start building your own credit history and score. This means you get a card linked to someone else's account, but you're not responsible for paying the bill. The way the main cardmember uses the card — like making payments on time and not using too much of the credit limit — will show up on your credit report too. So, if they use the card responsibly, it can help build your credit score.
Keep in mind that this is different from having a cosigner. With a cosigner, both of you are responsible for paying back any money spent on the card. As an authorized user, you don't have to pay the bills, but you also don't have much control over the account. If the main cardmember doesn't manage the card well, it could hurt your credit score. For instance, Discover allows a primary cardmember to add an authorized user who is fifteen and older to their credit card account. And once that teen turns eighteen, their credit history may help them qualify for better terms when applying for their own lines of credit.
Applying for a joint credit card account with someone else, like a friend or family member, can be another strategy to build your credit history and score. In a joint account, both people have equal responsibility for managing the account. This is different from having a cosigner, where the cosigner only becomes liable for payments if the primary account holder fails to make them. If both of you use the card wisely and make payments on time, it can help improve both of your credit scores. However, if one person mismanages the card, it could negatively affect both of your credit scores.
It's important to know that not all credit card companies offer the option for joint accounts. For example, Discover does not allow joint credit card accounts. This means you need to check with the credit card company first to see if they allow joint accounts before you plan to apply with someone else.
Getting a credit card when you're young or just starting with credit can be tough. But remember, if you’re looking to cosign with someone on a credit card, it's a big responsibility for both of you. If getting a cosigner isn't an option, there are other ways, like secured credit cards or being an authorized user on someone else's card. Whatever way you choose, the most important thing is to use credit wisely and make sure everyone understands their responsibilities.
