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No Credit Card? Get Some Credit Before it's Too Late

The Credit CARD Act of 2009, signed into law by President Obama on May 22nd, just cleared a major hurdle in its path to early adoption. As reported on CNNMoney.com last week, the House of Representatives overwhelmingly passed a new bill which would move the effective date for credit card reforms from February 2010 to December 1st. That's just under three weeks from today!

The bill still needs to make its way through the Senate before it gets to Obama's desk, but I think there's a good chance legislators will be able to push this through just in time for the holidays.

And while the CARD Act certainly brings with it some much needed consumer protections, there's reason for young adults to pay special attention to how the new rules could affect their future access to credit. If you're under 21 and have no credit history, you may just get hung out to dry. Here's why: The CARD Act bans credit cards (including student credit cards) for anyone under 21, unless you're able to secure a parent's co-signature or prove you have "sufficient" income to support the level of credit offered. That's not a bad idea in theory, but the problem is there are a lot of hard-working responsible students who don't have good relationships with their parents or documentable income. Shouldn't they have the right to build credit too? I think so.

In addition, we still don't know what "sufficient" income actually means yet. So, your part-time job that gets you through school and pays the bills may not even be enough to qualify you for a card with a minimal credit limit. And believe me, you don't want to be that person who graduates from school, takes his first job, and can't even get an apartment or a car loan because he has no credit. No credit history is basically the same thing as a bad credit history. It will put you at a significant financial disadvantage in your young adult life. So, if you don't already have a card, you should seriously consider applying for a no annual fee credit card now - before it's too late!

All you need is one card in your wallet to use sparingly for necessary living expenses while you pay the balance in full each month. That way, when you need to rely on your credit history for something much more important (think home, your own business) in your post-graduation life, it'll be there for you. Part of you may still want to procrastinate and put this off just a little bit longer, but do your best to fight the urge. Your credit score, whether you like it or not, will be your financial reputation in the real world - don't ignore it any longer.

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Joshua Heckathorn's picture

Joshua Heckathorn was President of Creditnet, is a credit expert and has been featured on CNNMoney, FOX Business, Yahoo Finance, The Street, and many other national publications during the past ten years.  He received a Bachelor of Science in Management (Finance) from Brigham Young University's Marriott School of Business and earned his MBA from Seattle University.

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