Youngest age to start building credit?

RushXTC · ‎09-26-2016

Do you need to wait until you hit 18 or are there cards that allow you to start sooner?

I'm a credit fanatic and would love to have my daughters credit built good by the time she hits 18, I know I can't really do much for another probably 15 years, but I'd like to plan ahead of time as to what I can do to help her have good credit by the time she's able to use it? I would have loved it if my parents did that and I had a good score by the time I was 18 lol, I struggled to work my way up!

I was thinking of adding her as an authorized user to a couple of my biggest credit line cards, However as I said before, this won't be for another decade or 2 lol since she's barely a newborn lmao!

As dumb as this sounds, I'd rather have this information from the get go than to have to try to look for it later on. Any help would be appreciated.

Anonymous · ‎09-26-2016

Glad your daughter has such a great parent.

The trouble is that knowing for sure how creditors will be assessing risk in 17 years is very difficult. You can't even expect that there will be the three big credit bureaus we have now and scoring algorithms that work even close to the same way. (Google BIG DATA and you'll see that there's all kinds of ways things could change in the next 15-20 years.) There's certainly no way to know whether AU accounts will be a viable way to give children a false credit history as they have been used for the last 20 years (they were almost scrapped by FICO in 2008, btw).

So much as I sympathize with your desire to have this information now (i.e. how you will best be able to help your daughter in 2033) than to have to try to look for it later on, there may be no other real possibility.

Let's assume for just a second, however, something that we have almost no grounds for believing. Namely that in 17 years from now the the three credit bureaus will still dominate the credit assessment landscape, they will still collect the same kind of data, AU accounts will still exist and the big credit scoring systems will all work the same as they do now and will let you give your daughter a great score early on that does not in any real way reflect her level of risk.

In that case you'll want to be able to give her not so much your biggest CL cards, but your oldest cards. Big CL cards do not in themselves help a person with her score. She could have 1-4% utilization with a $300 card. So the thing you can be doing now and in the next few years is making sure you have at least 3-4 major CCs with no annual fee that you are confident you can keep for a long time. And you should avoid cancelling old no-AF cards. This way you'll have some nice very old AU accounts you can give your daughter.

I do not know of any credit cards you can get for your daughter that would be in her own name when she is a child (less than 13 years old). But I believe there are options once she becomes a teenager. Will those options still exist in 12-13 years? Who knows? But you can certainly google CREDIT CARDS FOR TEENAGERS in 2027 and it will tell you what your options are. I just google that and found a number of options.

RobertEG · ‎09-28-2016

The Card Act of 2009 included specifc provisions related to grant of credit cards for consumers under the age of 21.

I recommend you check out those requirments.

In a nutshell, a creditor can grant a credit card to a consumer under the age of 21 if the application is accompanied by an authorization from a party over the age of 21, or the consumer can prove their independent financial responsibility to the creditor, such as by submission of proof of income.

Anonymous · ‎09-28-2016

@RobertEG wrote:
The Card Act of 2009 included specifc provisions related to grant of credit cards for consumers under the age of 21.
I recommend you check out those requirments.

In a nutshell, a creditor can grant a credit card to a consumer under the age of 21 if the application is accompanied by an authorization from a party over the age of 21, or the consumer can prove their independent financial responsibility to the creditor, such as by submission of proof of income.

Hi Robert. Do you know how young applicants can be in practice and be approved under this provision? For example, do credit card issuers ever issue a card to an eight year old as long as the application is being co-signed by the parent? My guess is no -- that in practice a CCC would not issue a credit card to a minor unless the kid was at least a teenager.

Also, is the language talking about being an AU to the older person's account -- or is it talking about getting a card of the minor's own (not classified as an AU)? I notice that the word "authorization" is used, which perhaps might mean that what is being discussed is being an Authorized User rather than a "card of one's own" (to riff on an essay by Virginia Woolf).

Our OP's kid would not benefit from being added as an AU at 8 versus at 16, since at the age of 16 she would instantly get all the long credit history of that card (notably age of oldest account) upon being added. But... if one's child could actually get a true non-AU card in his/her name at the age of 8, that would be a huge advantage over getting her first card at 18, since the account age would begin building much much earlier.

Always interested in benefitting from your knowledge. Thanks in advance.

RobertEG · ‎09-28-2016

The CARD Act is referring to getting a card under the young consumer's name.

It is not related to AU accounts.

The full text of the pertinent Section 302 of the CARD Act is provided below.

Additionaslly, if the young consumer is a college student, then there is a Section 302 (text not provided below) defining requirements and limitations for application for and grant of differrent types of college credit cards.

CARD Act of 2009

TITLE III—PROTECTION OF YOUNG CONSUMERS

SEC. 301. EXTENSIONS OF CREDIT TO UNDERAGE CONSUMERS. Section 127(c) of the Truth in Lending Act (15 U.S.C. 1637(c)) is amended by adding at the end the following:

H.R.627—15 ‘‘(8) APPLICATIONS FROM UNDERAGE CONSUMERS.—

‘‘(A) PROHIBITION ON ISSUANCE.—No credit card may be issued to, or open end consumer credit plan established by or on behalf of, a consumer who has not attained the age of 21, unless the consumer has submitted a written application to the card issuer that meets the requirements of subparagraph (B).

‘‘(B) APPLICATION REQUIREMENTS.—An application to open a credit card account by a consumer who has not attained the age of 21 as of the date of submission of the application shall require— ‘‘(i) the signature of a cosigner, including the parent, legal guardian, spouse, or any other individual who has attained the age of 21 having a means to repay debts incurred by the consumer in connection with the account, indicating joint liability for debts incurred by the consumer in connection with the account before the consumer has attained the age of 21; or ‘‘(ii) submission by the consumer of financial information, including through an application, indicating an independent means of repaying any obligation arising from the proposed extension of credit in connection with the account. “

Anonymous · ‎09-28-2016

Thanks Robert. I wonder how old a minor has to be in practice for a CCC to be willing to issue him/her a non-AU card? The legal language under paragraph B appears to implicitly permit six year olds to have their own credit cards (no age restriction) but I am skeptical that CCCs actually grant children cards of their own.

The only product I could find for a young age was the DFCU Teen Visa:

https://www.dfcufinancial.com/personal/cards/credit-cards/teen-and-student-visa

And even here the youngest they will approve it for is a 14 year old.

If our OP's daughter was 13 year older, this would be the kind of product he'd want to look for.

RobertEG · ‎10-04-2016

A six year old would not have a showing of independent means to repay, and thus would need a cosignor.

The card would thus not be in the sole name of the minor child.

The minor would not be the party for which the creditor would pursue any debt.

Anonymous · ‎10-04-2016

@RobertEG wrote:
A six year old would not have a showing of independent means to repay, and thus would need a cosignor.
The card would thus not be in the sole name of the minor child.
The minor would not be the party for which the creditor would pursue any debt.

Thanks Robert. Some children are quite wealthy, having their own bank accounts, trust funds, etc. Certainly that is true for many 11 and 12 year olds, if they are still rare compared to most kids their age. Does "no independent means to repay" legally apply by definition to all persons under a certain age? E.g. under the age of 18? (Assuming that we are not talking about a teenager who has been formally and legally emancipated.)

I am still curious about how early a child (say our OP's daughter) could in principle get a credit card in her own name, assuming her parent was willing to get her the appropriate bank accounts and so forth first. Our OP really wanted to set his daughter up with a card in her name as early as possible. If six years old is not legally possible, what about 10? 12? 14? etc.

RushXTC · ‎10-08-2016

Thanks everyone for the replys and the on going discussion, Very interesting to read.

The real reason behind this is because when I turned 18 and wanted to begin my credit, I found it a bit difficult and got myself into debt trying to work my credit (750 On time payments so far, Thank god). I would love to prevent this for my daughter, So I really do appreciate all the information that has been given to me thus far. .

RobertEG · ‎10-08-2016

I have only provided the criteria under federal law, as represented by the CARD Act.

Those provisons do not address issues of contract validity.

There are almost certainly provisions of state law that govern the ability of minors to obtain credit cards, and govern the legitimacy and ability to bring civil action on contracts with minors.

I would consult an attorney in your state if attempting to contract for credit solely in the name of a minor, for that is where the relevant legal restrictions and provisions regarding contracing for credit with a minor will be found.