When it comes to handling credit, young adults might be too smart for their own good. According to a recent survey by Sallie Mae, barely half of today’s college students ages 18 to 24 have a credit card, compared with nearly nine in 10 who say they use a debit card.

While a debit card can be a smart way to avoid the temptation of overspending—and possibly paying double-digit interest rates on balances—it doesn’t help you to build credit history. And young adults need a credit history to become financially independent.

"Unless you're extremely wealthy and can write a check for a car and a house, you'll have a need for credit,” says John Ulzheimer, a credit expert who once worked for FICO, Equifax, and Credit.com.

If your son or daughter wants to buy a home, for example, a credit history that reflects that payments have been made on a timely basis, will result in a high score. (A FICO score of above 740 gets you the best interest rates and terms.) A good score can be critical to getting approved for a mortgage. Even if he or she plans to rent, landlords often check credit scores to see if a prospective tenant is reliable and makes payments on time. Without one, a landlord might require a bigger security deposit.

Auto lenders also rely on a credit score when reviewing borrower applications. If there isn’t one, the lender could charge a higher interest rate or you might be required to co-sign for your son or daughter. 

How Parents Can Help

The best way you can help young adults without an income build credit is to help them get a credit card. Here’s what you can do:

  • Add your young adult to your credit card account as an authorized user. Adding anyone to your card as an "authorized user" means your payment track record shows up on that person’s credit report. You’re still responsible for all payments, but for a young adult this could help to build a credit history. There are limitations, however. The FICO score gives less weight to a consumer who is an "authorized user" on someone else’s account than to the person who pays the bills. Since some credit card companies don’t report "authorized users" to the credit bureaus, ask the credit card issuer about its policy before adding someone to your account.
  • Be a co-signer on your son’s or daughter’s credit card. One reason that many young adults do not have a credit card is because of a federal law that prevents credit card issuers from soliciting new users under the age of 21 unless they can prove they have a steady income. But young adults without an income can qualify for their own card if an adult with income co-signs the card agreement. Matt Schulz, senior industry analyst at CreditCards.com, suggests that if you choose to co-sign, insist on full access to the account since payment is, ultimately, your responsibility.
  • Suggest your child get a secured credit card. A secured card is a great way to build credit while minimizing risk, says Schulz. A secured card requires that the borrower first pay a security deposit. Spending each month is limited to the amount deposited. Without independent income, a child under age 21 will still need you to co-sign for a secured credit card.