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At What Age Can Your Kid Start to Build Credit? The Surprising Answer

Most of us know that you have to be at least 18 years old in order to sign a legally binding contract. But did you know that, under specific circumstances, your teenager could actually start to build credit and improve their credit rating prior to age 18?

For starters, realize that the type of credit in question, state and federal laws, as well as specific bank policies all play a role in determining the age at which someone can legally establish credit.

In most cases, those under 18 will be listed as co-signers or authorized users on the credit accounts of an adult who is already 18, or possibly 21 years of age.

Here are a few examples.

Your teen who is, say, 16 years old could get an auto loan, as long as you or another guardian or adult agrees to serve as co-signer on the car note. (Again, the age of the older adult must be either 18 or 21, depending on applicable state laws).

Then there are credit cards.

A teenager can obtain a student credit card or a secured credit card, or he or she can be added as an authorized user to a parent’s current credit card.

The benefit of these transactions is that you could help your child begin to establish credit in his or her teens.

I’m not suggesting that teenagers need to have credit at such an early age. But I do think that for responsible. mature teens, and for those who are headed off to college, it could be beneficial to help them learn how to manage credit wisely — particularly as they enter young adulthood.

Federal laws can also play a role in when your child can acquire credit. Credit card reform now requires most credit card applicants under the age of 21 to have a co-signer, unless the person can prove that he or she has a job (i.e. regular income) that would support credit card repayments.

The Citi Forward Card is one exception, and it’s specifically designed for college students. So even people age 18 to 21 get approved for this card without a co-signer.

Now, let’s take a quick look at student loans, especially since young people who are starting college generally go off to school at age 17 or 18. Any of these youths can – at least in theory – apply for and receive either federal student loans, which are backed by the U.S. government, or private student loans. Needless to say, such college loans also help to establish one’s credit rating.

In practice, though, a teenager applying for college loans must also out a FAFSA (the Free Application for Federal Student Aid) to be considered for a government educational loan. And that FAFSA will require information taken from the parent’s income, debts and assets.

Therefore, student loans for many teens and young adults are generally linked to an adult who is 21 or older.

And lastly, what about mortgages? Well, I don’t know any 18-year-olds who are homeowners – but they could take on homeownership.

That’s because mortgage lenders are forbidden from discriminating against a borrower as long as the individual is at least 18 or of legal age to sign a home loan contract in their state.

Needless to say, it’s one thing to strive to be a homeowner post-college or in young adulthood.

But a typical 18-year-old would probably face very long odds in providing the credit, assets and income requirements most lenders would want to see before approving a mortgage loan.

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