In the early 21st century, pretty much any student with a pulse could get a credit card. The 2009 Credit Card Act makes it tougher to get a first card and start building credit if you don't have solid financial resources. Becoming an authorized user of your parent's credit card is one of several ways to kick-start your credit history.
Once your parent puts you on her card as an authorized user, you start sharing credit histories. When one of you rings up purchases and pays them off, it boosts both your credit scores. Even if you never use the card, this works out well for you if your parent is paying her bills. If you use your card irresponsibly, however, your parent has to settle whatever debts you ring up that you can't pay.
Another option is to have your parent co-sign a card application. Under the 2009 law, having a co-signer lets you land a card when you don't qualify under your own power. Your parent's spending won't be factored into your credit score, but using the card responsibly will still give you a good credit history. Although your parent is responsible if you don't pay regularly, she doesn't get an itemized statement the way she would with an authorized card. That gives you more privacy.
Another way to build credit is with a secured card. You secure the card by depositing $200, or $500 -- or however much you can afford -- in a bank account, then you take out a card for the amount of the deposit. This reduces the risk to card companies, so they are less worried about giving you a card. Secured cards come with multiple fees that eat into your deposit, however, and the interest rates are high.
Building good credit-card habits is just as important as building a credit score. An authorized card makes it easy to spend freely: You have your parent's credit limit to draw on, and it's probably higher than what you'd get on your own. If you can't trust yourself, having your parent co-sign a card with a lower limit is safer. You also need to guard your financial information. Giving your credit card online via an unsecured WiFi hot spot could leave your data compromised, for instance.
- Credit Cards With Cosigners
- How to Build Credit When You Turn 18
- Can a Parent Co-sign for a Credit Card?
- Will I Be Able to Build Credit If My Husband Adds Me to His Card?
- Can Being a Co-signer on an Established Credit Card Help Increase Your Credit Score?
- How Does Unsecured Debt Vs. Secured Debt Affect Credit Ratings?
- How to Reactivate an Inactive Credit Card
- Advantages & Disadvantages of Closing a Credit Card Account