Graduating from high school is often the first time young people begin to manage their own financial lives. At this age, young people generally enter the adult world with a clean slate. They have no real debts except for maybe a student loan, with a clean credit report, free from any bad marks. In some cases, however, as surprising as it may sound, a 17-year-old may enter the adult world with marks on her credit report that impact her credit score.
Minor Teens and Credit
Banks, credit card companies and cell phone companies are the types of businesses with which people have credit accounts. If a 17-year-old walked into one of these businesses and requested a line of credit, as a general rule, the business would possibly deny the 17-year-old minor. The business is aware that generally speaking, minors lack the legal capacity to sign a contract, and that the minor could get out of the contract if he wanted to do so. There do, however, exist some exceptions.
A 17-year-old minor may get a car loan, with a co-signer – often one of the minor's parents. The 17-year-old then has her name on a loan contract, promising that she will abide by the terms of the loan agreement. If she and her co-signer fail to make regular payments, the car goes up for repossession. A repossession shows up on both the minor's and the parent's credit reports, as the two parties are equally responsible for the debt. The repossession may have a negative impact on the minor's credit score.
When a person under the age of 18 goes to the doctor, the physician's office may issue a financial responsibility form to the parent, which says something to the effect of "the adult who is responsible for this child is responsible for the bill." However, depending on the state where the 17-year-old minor lives, medical care may be considered a necessity, and the medical provider may be able to collect the debt from the minor if the provider can't secure payment from the parent. North Carolina generally has this provision for minors, as well as legislating that spouses be liable for each other's medical bills. If neither the parent nor the 17-year-old pays the debt, it can be reported to the credit bureaus. Medical bills can stay on the report for seven years.
At age 17, some minors are emancipated from their parents or legal guardians. In these cases, they are considered legal adults in some states. If an emancipated minor opens a credit account with a business, she will be held to the contract and if she does not make payments as she is supposed to, this would damage her credit score like any other adult.
An article published on Creditcards.com discusses a situation in which a minor opened a PayPal account, potentially using a false date of birth, then had the account frozen. Debt collectors then pursued her. If she willingly lied about her age, she may still be liable and could even face criminal fraud charges, since while minors generally can't sign contracts, they legally can commit fraud. The minor can dispute the debt, but her efforts may be to no avail. If a minor opens an account using a false date of birth, then fails to make payments on the account, this will lower her credit score.