Todd Christensen Profile Picture
Staff Writer at Debt Reduction Services

Children shouldn't open credit card until they've proven financial responsibility.

When Should Teens and Young Adults Start Building Their Credit?

I saw this question from a reporter this morning and don’t want to wait until their publication comes out before I address it myself.

What the parents are actually asking is this: should my child open a major credit card in their own name?

My simple answer is this: NO! At least not until the teen/young adult can answer ALL of the following questions with a strong, “YES:”

  1. Have you gone two years without bouncing a check, having a debit card purchase declined or incurring an overdraft?
  2. Have you made on time, monthly payments to a utility account (electricity or heat) or to a contracted cell phone in your name for the past year or assume other financial responsibilities?
  3. Do you have a regular and sufficient income?
  4. Have you saved money from every paycheck for the past year without later “raiding” (emptying) your savings account?
  5. Have you set up and have you transferred money each month to an automatic retirement savings account, such as an IRA (Roth or traditional) or a 401(k)/403(b)?

If you can’t answer yes to ALL or the majority of these questions, I’d suggest you concern yourself with building a better history of money management before worrying about credit management.

A teen or young adult can consider opening a credit card once they've shown good financial behavior.In the meantime, here are some alternatives:

  1. Can you get a card on your parent(s)’ credit card account as an “authorized” user? If so, you will inherit some of their good credit rating. To assure your parents, you can inform them that simply having you as a user will not impact their credit standing unless you are issued a card and abuse your card swiping privileges. If they do not trust the idea yet, you can suggest that once the card arrives in your name, that it remains in their possession until the appropriate time. Note that this method is generally free.
  2. Put a utility account or cell phone contract in your name and make monthly payments on time and in full. After you’ve made a habit of on-time payments, you can call up your provider and request that they report your payment history to the major credit bureaus. This will begin to build what lenders view as alternative credit history that may help in future credit or loan applications.

If you do move in the direction of opening a credit card or store credit in your own name, start small. Report your card usage to your parents each month to help keep you on track and to avoid incurring too much debt. Never charge an amount on credit that you cannot fully repay in a month’s time.

Good luck, and enjoy your week!

Todd Christensen
Director of Education

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