Editorial Policy

Better to be an authorized user or get your own card?

Erica Sandberg

January 9, 2015

QHi Erica,

I am 22 and in my final year at the University of Minnesota. No credit cards but huge student loans ($80,000, I think), even though I am working and have been all along. Can you tell me what this does to my credit? They are delayed until after graduation. My dad told me he might add me to his card so I could build my credit, but I don't want to do that unless I have to. The truth is we have never had a good relationship. He has never paid anything for my college, and I'm not sure it would be a good idea to be tied to him this way. He would lord it over me, but if it is the only way, I will. I need your advice. — Jim

ADear Jim,

My immediate answer to your question is no, do not accept your father's proposition. At least on the surface, it appears he is someone you do not want to enter into a contract with.

Not that his gesture isn't generous. When a credit card account owner adds another person to his account as an authorized user, he is essentially sharing his credit line. As a guest, you'd enjoy charging privileges with your own credit card, but would not be liable for the bills. While account ownership would remain solely his, the activity would show up on both of your credit reports. If the account is managed well — by him paying on time and keeping the debt low — you benefit. But if he falls behind or racks up big, revolving balances, you don't.Ask Erica

Aside from not knowing what kind of credit customer your dad is, a history of strained relations doesn't bode well. So can you get a credit card without his help? Probably. And should you? Sure!

It's true that you owe quite a bit for your education, and those loans are being reported to the three major credit bureaus, TransUnion, Experian and Equifax. They are also calculated into your credit scores. However, student loan debt is not viewed the same as consumer debt. If you owed a similar amount to a credit card company, I doubt you would be able to get another card, unless your income is extremely high and you have the ability to charge hundreds of thousands of dollars. Student loans are considered “mid-term” debt, so they are factored in differently than short-term obligations. Aside from that, you're not due to make payments for at least a year (longer with the grace period), so you are in a decent position to qualify for a personal starter card.

Before applying for anything, know where you stand, credit wise. Pull your credit reports for free at AnnualCreditReport.com and make sure to check them for errors. You can buy one of your scores from MyFICO.com for about $20 or use an online estimating tool to get an idea of where you stand. FICO is the dominant credit scoring model.

Because you have student loans, they will be listed on the reports, which means you do have some numbers to check. FICO scores range from 300 to 850, with 850 as the best. Chances are yours won't be high, but whatever they may be, there's probably a credit product for you.

Most people begin their charging life with a secured card, and that's not a bad idea for you. Don't worry, these cards look and act just like traditional, unsecured cards. The only difference is that you put money down to secure the credit line, which is returned to you when you close the account and pay the balance in full. It's safe for the issuer because the lending risk is minimized (they can take the funds held in deposit if you default). That makes qualification relatively easy. There are also cards developed specifically for college students, so check them out on CreditCardGuide.com. If you choose a secured card, make sure the issuer will report your activity to the credit bureaus.

The Credit CARD Act makes it tough for people under 21 to get their own account without a co-signer, but you're over that age. Still, you will need to prove that you have enough income to support the amount of debt you could get into. As you've been working and are earning at least a little, the likelihood that you'll be granted a commensurate credit line is good.

When you get the card, charge a small amount once a month. Pay in full and always on time. Such a simple formula will guarantee that you'll consistently add excellent information to your report, causing your scores to increase. And without Dad's oversight.

Got a question for Erica? Send her an email.