11 Nov
2011

Building Credit Under 21

Posted by : Timothy Brogan

There’s a lot of conflicting information buzzing around about establishing credit under the age of 21. Questions like: Can you build credit that young? If so, how? And, is it really necessary to start building credit right out of high school?

President Obama signed The CARD Act into law in May 2009 and it was planned to roll out in three phases over the course of a 15-month period. The Act was designed to better regulate financial services, including those which affect America’s young people.

Under new law:

Individuals under the age of 21 are required to have a co-signer or provide proof of income, to obtain any credit card. (Note: You must be at least 18 to apply for any credit card.)

Individuals under the age of 21 cannot receive prescreened credit card offers unless they’ve given their permission.

Card issuers cannot raise a credit limit on an account for individuals under 21 with a co-signer without written permission from the co-signer.

Credit card companies are prohibited from target marketing with free gifts in exchange for credit card applications, to college students on or near campus.

In sum, it is possible to build credit under the age of 21. However, establishing credit with credit cards is not a good idea. Typically, individuals between 18 and 21 are offered cards with extremely high interest fees. Studies indicate that this age group has a significantly increased risk of falling into debt before building a positive credit history. Therefore, if you’re under 21, it’s better to focus on monthly bills and repaying student loans than establishing credit.

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