Wanting or needing credit isn’t always as simple as filling out an application. Even college students, who have a lot of financial services marketed to them, may face obstacles when trying to get a credit card.
Why? A lot of it comes down to their credit history — or lack thereof. The length of your credit history has an impact on your credit scores — the longer your history of responsible credit usage, the better. Many 18-year-olds heading to college don’t have any credit history, which makes them an unknown to many lenders who may not be as willing to approve them for a credit card.
Getting Credit as a Student
A lot of students may not have any income while they’re in school, but a credit card application stating “$0” for income isn’t likely to get approved. But that doesn’t mean you should exaggerate your income.
“You have to be honest,” says Gerri Detweiler, director of consumer education for Credit.com. “A card issuer doesn’t want to extend credit to someone who can’t pay it back.”
As part of the CARD Act, credit card applicants under the age of 21 must prove they have sufficient income to make their credit card payments, otherwise someone must co-sign for the account. Students with part-time jobs may have enough income to get cards on their own if a co-signer isn’t an option. Detweiler says student credit cards can be easier to get, because issuers want to be the first card in young consumers’ wallets.
Without income or a co-signer, students have another credit card option: asking to become an authorized user on a parent’s account. The accountholder — in this case, the parent — pays the bill, but the student gets a card in his or her name, and uses it to build a credit history.
This approach could require some additional financial education, as giving someone purchasing power without the responsibility of paying the bill could lead to overspending.
Another option that many students turn to is a secured credit card, which requires a cash deposit that is used to “secure” the credit card. This means you can apply for a secured card and put down a cash deposit, which then becomes your secured card’s limit in most cases. After showing a responsible payment history with this account, many banks will allow secured cardholders to upgrade to a regular consumer credit card that doesn’t require a deposit.