Catch-22: Establishing Credit

FRESNO, Calif. Thomas Agostino is going to college, working in a restaurant, and living at home to save money. At age 22, he was confident he'd qualify for a credit card.

"I talked to them for about 30 minutes and finally they told me that I wasn't approved for a credit card. And it made me very angry," Agostino said.

The biggest new obstacle to getting a credit card for those under 21 will be getting a co-signer, which can be a parent or any adult willing to put his own credit score on the line. If they can't get a co-signer, then they need to show they have the financial ability to pay off a credit card.

Establishing credit is a challenge many young people face. Consumer reports says one way to bypass stricter lending policies is getting a secured credit card.

"You deposit at least a couple of hundred dollars as security with the bank. The bank then holds on to that money but lets you make credit-card purchases," Greg Daugherty said.

If you make your payments on time, you can start to build a good credit rating. But be aware, if you miss a payment, it's deducted from your security deposit and your credit rating takes a hit

"Before you rush to sign up for a secured credit card, take a hard look at the fees. They can be exorbitant," Daugherty said.

For instance, the new millennium card charges an annual fee of $59 and an initial processing fee of up to $130. The platinum zero charges fees that total $120 a year.

"A couple of cards we like are the Citi-secured MasterCard and this one from Orchard Bank. Both have low annual fees. And the Orchard Bank card even waives the fee for the first year," Daugherty said.

Both cards also offer interest on your security deposit. For someone like Thomas, making payments on a secured credit card for about a year and a half should allow him to graduate to a standard credit card.

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