Somewhere between the age of 17 and 18, young adults are supposed to be gifted with the magical ability to handle college, adulthood, taxes and credit for the first time. Unfortunately, most people move from their teens into adulthood without a firm grasp on how to handle all this newfound opportunity and responsibility, and without a good idea of the consequences that some of their new decisions might bring. (To help you establish some strong credit, read How To Establish A Credit History.)

TUTORIAL: Credit and Debt Management

That is why it's so important for newly-minted credit card holders and student loan borrowers to be given a set of guidelines regarding financial liabilities that they should avoid.

Avoid Cosigning Loans
If you have a friend or family member who wants a loan for a new car, tuition or other big ticket purchase, they may ask you to cosign once you turn 18. As a cosigner, you are guaranteeing that the primary borrower will pay back the loan. If they don't, you will. No matter how much you trust the individual who is asking you to cosign, it's best if you don't sign your name to any loan you aren't willing to pay.

If the primary borrower pays late or stops paying, collectors will come after you for the balance. Additionally, it will affect your credit rating, which could hurt your ability to get your own loans for years into the future. It's one thing to be accountable for your own financial activity, but being accountable for someone else's is generally a bad idea.

Don't Add Authorized Credit Card Users
When you take out a credit card, you can add authorized users to the account. These individuals will get credit cards in their names and all the charges they make on the account will be applied to your balance. The person who is responsible for paying that balance, no matter who charged it, is the account holder. Authorized credit card users don't have to make monthly payments, their credit isn't affected by late or non-payments and they don't get copies of the bill. Instead, they can charge on your account as much as they want and never have any financial liability.

Skip the Joint Account
Whether it's through a bank account or credit card, at 18 you now have the opportunity to share your financial life with the person that you love, but should you? While you may not be able to imagine a life without this individual right now, things can change. With a joint account, continued access to your financial life even after a break up, is extremely hard to stop. You can't simply remove someone from a joint account like you can from your dating life. You have to close the accounts and open new accounts. Until you do, they can access the money and credit you have available in the joint account

Cell Phones
If you watch daytime television, then chances are good you've stumbled on a few court show episodes in which one person is suing another for unpaid cell phone bills. It happens all the time. Someone runs uphis or hercell phone bill and can't pay it.Then cell phone service is cut off, and they beg a friend to add them to their cell phone contract. Once you add someone to your contract, you are guaranteeing his or her payment which means that you need to pay the bill if he or she doesn't. If an individual doesn't respect his or her own credit enough to pay the bill they run up under their own name, what makes you think they will treat yours any differently?

The Bottom Line
If a bank or other financial institution isn't willing to open an account or extend credit to an individual, then you might want to rethink your own willingness to. Look out for your own financial health and wellness first. Don't allow someone else to sabotage your financial future when you are just getting started. (For tips on how you can improve your credit, check out 5 Keys To Unlocking A Better Credit Score.)

Related Articles
  1. Credit & Loans

    10 Reasons To Use Your Credit Card

    There are several benefits to paying with credit instead of debit, if you use a credit card responsibly.
  2. Credit & Loans

    5 Extreme Ways To Raise Your Credit Score

    Desperate to rebuild your credit score because you can’t obtain a loan with a decent interest rate? Here are some extreme options to try.
  3. Personal Finance

    The Top 5 Personal Finance Experts to Follow in 2016

    Here is a look at five money and investing experts who can help you reach your financial goals for 2016.
  4. Economics

    What is a Trade Credit?

    Trade credit means that a customer purchases goods from a seller who allows the purchaser to pay for those goods at a later time.
  5. Investing

    Amazon Financing Now in the U.K.: Is America Next?

    Amazon has unveiled a great credit product in the U.K. Will America be the next country to have access to this financing option?
  6. Credit & Loans

    Why You Should Use Your Credit Card For Purchases

    Responsible credit card users who always pay off their monthly balances should use their cards to buy everything.
  7. Credit & Loans

    The Fed's Interest Rate Rise & Your Credit Cards

    The U.S. Federal Reserve recently raised the lending rate from 0% to 0.25% – the first time since 2006. How does that affect your credit card payments?
  8. Investing News

    Warren Buffett: Be Fearful When Others are Greedy

    It is prudent for the investor to understand when the party has gone on long enough and the clock is about to strike midnight. Be fearful when others are greedy.
  9. Savings

    Building an Emergency Fund

    Do you have enough savings to cover the costs of unforeseen crises? We show you how to plan ahead.
  10. Retirement

    Understanding Credit Card Interest

    Paying these rates can impact your disposable income and your investment returns.
RELATED FAQS
  1. How can you pay your Walmart credit card?

    Holders of Walmart credit cards can make payments on their balances due by mail, online or at Walmart and Sam's Club stores. ... Read Full Answer >>
  2. Is Apple Pay safe and free?

    Apple Pay is a mobile payment system created by Apple to reduce the number of times shoppers and buyers have to pay for goods ... Read Full Answer >>
  3. Can you use your Walmart credit card at Sam's Club?

    Consumers can use their Walmart credit cards to shop at Sam's Club. However, they cannot use their Walmart credit cards when ... Read Full Answer >>
  4. How can you cancel your Walmart credit card?

    Walmart offers two types of credit cards: the Walmart MasterCard and the Walmart credit card. How to Close Your Walmart Credit ... Read Full Answer >>
  5. Does the Walmart credit card have an annual fee?

    The Walmart credit card does not charge annual fees to its cardholders. It does, however, have other fees associated with ... Read Full Answer >>
  6. How do NetSpend cards work?

    NetSpend prepaid MasterCard and Visa cards are popular prepaid debit cards requiring no minimum balance and no credit check. ... Read Full Answer >>
Hot Definitions
  1. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  2. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  3. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  4. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  5. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
Trading Center