Credit Card Law's Effect on People Under 21

Michelle Singletary of the Washington Post had a great column yesterday about the new credit card law’s effect on young consumers.  The law will allow people under 21 to get a credit card only if one of two conditions is met:  if the consumer can demonstrate ability to repay the debt, or if a parent, guardian, or someone else over 21 agrees to co-sign.

Singletary practically begs parents not to co-sign.  She beautifully dismantles the oft-cited need for young people to build up a credit history as a reason for parents to co-sign:

Don’t give me that baloney about young adults needing a credit card to build a good credit history or to learn to handle credit. Those are reasons that have been fed to you by the credit card companies. It’s a self-serving argument.

There’s little need to worry that they won’t be able to establish a good credit history. With the sophistication of the automated credit-scoring system, it takes only about six months to create a credit history, according to Craig Watts, public affairs director at FICO, the company that produces the FICO credit scores.

Worried about your child getting a job without a good credit history? Don’t.

Most employers don’t do a credit check. And even those who do pull a potential candidate’s credit report are looking for signs that someone has been financially irresponsible. A new college graduate or young adult can easily explain the lack of an extensive credit history.