Navigating the Credit Card Maze at 17: A Comprehensive Guide

So, you’re 17 and eager to build credit? That’s commendable! But the question is, how do you actually get a credit card at 17? The short answer: you can’t get one in your own name unless you’re an emancipated minor. Federal law generally prohibits issuing credit cards to individuals under 18 without an adult co-signer or proof of emancipation. However, there are several viable pathways to consider, including becoming an authorized user on a parent or guardian’s card, exploring secured credit cards, and diligently preparing yourself for creditworthiness when you turn 18. Let’s dive into these options and other related topics.

Understanding the Legal Landscape and Age Restrictions

The Credit CARD Act of 2009 fundamentally altered the credit card landscape for young adults. It aimed to prevent reckless lending to those who might not fully grasp the implications of credit card debt. Before this act, it was far easier for 18-20-year-olds to obtain credit cards, often leading to financial hardship. Now, stringent regulations are in place.

The Impact of the Credit CARD Act

The Credit CARD Act of 2009 prevents credit card companies from issuing credit cards to anyone under 21 unless they demonstrate an independent ability to repay the debt, or have a co-signer. The ability to repay typically means having a verifiable income source. This law created a significant hurdle for 17-year-olds, who usually lack sufficient income or a credit history of their own.

Emancipation: The Exception to the Rule

While rare, emancipation is a legal process where a minor is granted the rights and responsibilities of an adult before reaching the age of 18. If a 17-year-old is legally emancipated, they can apply for and obtain a credit card in their own name, just like any adult. However, the emancipation process is rigorous and requires demonstrating financial independence and the ability to manage one’s affairs responsibly.

Strategies for Building Credit Before 18

While you can’t get a credit card in your own name (without emancipation), you’re not entirely powerless. Here are some effective strategies to begin building credit before your 18th birthday:

Becoming an Authorized User

This is the most common and arguably the easiest route. As an authorized user on a parent’s or guardian’s credit card, you’ll receive your own card linked to their account. Your spending habits are reported to the credit bureaus, which helps you establish a credit history. Ensure your parent or guardian makes timely payments and has a low credit utilization ratio (the amount of credit used compared to the total credit limit) as their responsible behavior will positively impact your credit profile.

Focusing on Financial Literacy

Even without a credit card, you can equip yourself with the knowledge to manage credit responsibly later. Read books, take online courses, and learn about budgeting, saving, and investing. Understanding credit scores, interest rates, and the implications of debt will prepare you to make informed financial decisions when you finally do get your own card.

Building a Banking Relationship

Open a checking and savings account and manage them responsibly. Consistently deposit money, avoid overdrafts, and maintain a positive balance. A strong banking relationship can be a positive factor when you apply for credit cards or loans in the future.

Exploring Options After Turning 18

Once you turn 18, the doors to credit card ownership swing open. Here are your primary options:

Secured Credit Cards: A Stepping Stone

Secured credit cards are designed for individuals with limited or no credit history. You provide a cash deposit as collateral, which typically serves as your credit limit. By making timely payments on your secured card, you demonstrate responsible credit behavior and build a positive credit history. After a period of responsible use (usually 6-12 months), you may be able to upgrade to an unsecured credit card and have your deposit returned.

Student Credit Cards: Targeted at Young Adults

Student credit cards are often easier to qualify for than traditional credit cards. They are designed specifically for students with limited credit history and may offer rewards or benefits tailored to student needs. Be sure to compare interest rates, fees, and rewards programs before choosing a student credit card.

Unsecured Credit Cards: For Established Credit

Unsecured credit cards don’t require a security deposit. These cards are generally available to individuals with good to excellent credit scores. As a young adult just starting out, you may not qualify for the most premium unsecured cards right away, but building a solid credit history through other methods, such as secured cards or authorized user status, can pave the way.

Frequently Asked Questions (FAQs)

Here are some common questions about getting a credit card at 17 and building credit as a young adult:

1. Can I get a credit card if my parents co-sign?

Technically, credit card companies generally don’t offer co-signed credit cards anymore, thanks to the Credit CARD Act of 2009. The law pushed for a more nuanced approach to young adults and credit. The best approach is to become an authorized user on a parent’s credit card.

2. What are the benefits of being an authorized user?

Being an authorized user allows you to build credit history without the full responsibility of owning a credit card. Your payment activity on the card (provided the primary cardholder pays on time) is reported to the credit bureaus, helping you establish a credit score.

3. Will my parents’ bad credit affect me as an authorized user?

Yes, potentially. If your parents have a poor credit history and make late payments or have high credit utilization, it could negatively impact your credit score as an authorized user. Choose your parent or guardian wisely!

4. How old do I have to be to get a secured credit card?

You must be at least 18 years old to apply for a secured credit card.

5. What’s the difference between a secured and an unsecured credit card?

A secured credit card requires a cash deposit as collateral, while an unsecured credit card does not. Secured cards are easier to obtain with limited or no credit history.

6. How much of a deposit do I need for a secured credit card?

The deposit amount for a secured credit card typically equals your credit limit. Deposit requirements vary, but common amounts range from $200 to $500.

7. How long does it take to build credit with a secured credit card?

You can start seeing improvements in your credit score within 6-12 months of responsible use. This means making on-time payments and keeping your credit utilization low.

8. What is a good credit score to aim for?

A good credit score typically falls in the range of 670-739. An excellent credit score is 740-799, and exceptional is 800+.

9. What factors affect my credit score?

The primary factors that influence your credit score are payment history, credit utilization, length of credit history, types of credit used, and new credit.

10. What is credit utilization?

Credit utilization is the amount of credit you’re using compared to your total available credit. Experts recommend keeping it below 30% to avoid negatively impacting your credit score. Ideally, aim for under 10%.

11. How can I check my credit score?

You can check your credit score for free through websites like Credit Karma, Credit Sesame, or AnnualCreditReport.com. The latter provides free access to your credit reports from all three major credit bureaus.

12. What happens if I miss a credit card payment?

Missing a credit card payment can severely damage your credit score. Late payments are reported to the credit bureaus and can stay on your credit report for up to seven years. It’s crucial to make all payments on time to maintain a good credit score.

Conclusion: Starting Early and Building a Solid Foundation

While getting a credit card at 17 can be challenging, it’s not impossible to start building credit early. Becoming an authorized user, focusing on financial literacy, and establishing a strong banking relationship are all valuable steps. Once you turn 18, consider a secured credit card or student credit card to further build your credit history. Remember, responsible credit management is a lifelong skill that will benefit you for years to come. Start building your financial future today!