Money Talk Monday: Get to the core of credit scores

By Debra Avara


At what age should young adults start concerning themselves with a credit score? What is the wisest way to go about building a good credit score?

Young adults need to be concerned with good credit from the get go, as teenagers. Many young adults actually start late (age 21, 22) in building good credit, where others by that age have already destroyed their credit. As soon as a person starts to do anything at all with credit, they need to be concerned in building good credit. It takes years to build good credit, and only a few months to destroy it. Once it is destroyed, it can take 7 to 11 years to rebuild again.

The legal age in Texas for a credit card is 18. You may get one younger, but it would probably come with a lot of restrictions. However, in 2010, Congress passed a bunch of new laws regarding credit cards. The biggest change was that people under 21 years of age now had to have a parent/guardian/adult co-sign for them. Their thinking is that the adults would know better and wouldn’t LET the ‘kids’ get out of control in their credit card debt. My thinking is once you understand credit cards, you will handle the card properly, regardless a co-signature or not!

Two relatively easy ways to get a credit card:

1. Your parents can actually put you on their card as an authorized user. Of course, if your parents don’t have good credit, you don’t want to do that. But if they have good credit, this is a good way to start. Their credit becomes yours. Even if you never use the card, it can help you get another card. You and your parents should discuss and be in agreement as to how and when you can use this card, and obviously, you shouldn’t abuse it!

2. You can get a ‘secured’ credit card. If you have a savings account at your credit union or bank, you can ask them for a ‘secured’ card. This means that if you have $1000 in savings, ask them for a card with a $500 limit. You will not be able to use $500 of your savings account because it is ‘securing’ your card. If you default on your card, meaning you don’t make the payments, they will simply take it out of your account, so they really have nothing to lose. BTW – Credit unions are my choice of banking facility (less fees to deal with).

Once you have your card, buy something (on sale) that you need (not want!) then set the card aside. When the bill comes in, pay it in full and ahead of time. Do this for several months and you will start building good credit. Try never to charge more than 10% – 12% of the total card limit. And always pay in full (no interest to pay!)

After 6 months or so, you could try applying for a store credit card. Then do the same with that card. Buy something small, pay it off.

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