Build credit

[2thDoc]

so...son2 asking if he should get a credit card to "build some credit" while in college.
I know nothing of this world. What say ye banking/credit people?

[Bad Habit]

Silver spoon people know not and care not about "credit"
Why didn't you pass the spoon to your son?

[theoldblackdog]

Not a banking or credit person but my brother is and he would absolutely say to do it IF he is going to use it properly and make the payments that come with it as well. Everything is based on credit these days so if he’s level headed then why not get a head start on building a good credit.

Side note once I was married my wife had little to no credit, one credit card with a $1000 limit was all. When we went to buy a house I could get a better rate by myself than with her on the mortgage as well because she didn’t have any credit history. I made the decision to put her on the mortgage just to help her build credit in case something happened to me

[First Coat]

I did when I was in college for that reason but you have to pay it off every month. There are those that try to do it and fail miserably and get "addicted" to free money. The result being the credit fail, tough to recover from.

[Phone Man]

Tell him like my parents told me. If you dont have money in your account to pay for it, dont put it on credit card. Mine was and still is for emergencies or buying stuff online. But they can put a person in a bad way real quick.

[theoldblackdog]

Tell him like my parents told me. If you dont have money in your account to pay for it, dont put it on credit card. Mine was and still is for emergencies or buying stuff online. But they can put a person in a bad way real quick.

I get what you are saying 100%, but when absolutely everything is tied to your credit, vehicles, renting an apartment, even heard of it for cell phone bills, then I think you need one and you have to use it regularly and not just for emergencies. Think the younger generations have no choice but to build credit

[scatter shot]

Another option to build credit for your kid is to take them to Best Buy and buy them a computer on credit in their name and cosign with them.
I did that with my son many years ago and he had a 780 FICO when he was 18 years old. Bought his first home when he was 20.

[BCR3]

Going through this with son number one now. Like others have said get one with $1,000 limit and make sure he manages it properly and pays it off each month.

[JJ1965]

Oh, and don’t necessarily go for a low limit card. If he has self control, the higher the limit the better for his score, as long as he pays the balance off monthly.

You can get cards with up to 3-4% rewards on gas and food, which saves a lot.

[scatter shot]

A FICO score is absolutely important and Dave Ramsey is an idiot.

Credit is used to underwrite many things including home and auto insurance. Bad credit or no credit could cost you hundreds more a year in premiums or could actually make you ineligible for coverage.
I think it's bullshit but I don't make the rules, please don't shoot the messenger.

[SCSwitchback]

A FICO score is absolutely important and Dave Ramsey is an idiot.

Credit is used to underwrite many things including home and auto insurance. Bad credit or no credit could cost you hundreds more a year in premiums or could actually make you ineligible for coverage.
I think it's bullshit but I don't make the rules, please don't shoot the messenger.

That’s an opinion, not a rule. Someone in position to pay cash for whatever they buy isn’t paying BS interest on cars/boats/a tv, etc. That savings easily offsets any marginal increase you might see in insurance. I’d agree that young adults need to establish a strong credit score to get started in life but insurance doesn’t factor into that.

[scatter shot]

That’s an opinion, not a rule. Someone in position to pay cash for whatever they buy isn’t paying BS interest on cars/boats/a tv, etc. That savings easily offsets any marginal increase you might see in insurance. I’d agree that young adults need to establish a strong credit score to get started in life but insurance doesn’t factor into that.

You couldn't be more wrong if you tried.
I've seen the use of "financial stability" (credit score) in the insurance industry morph over the years and the real affect it has on rates literally thousands of times. Insurance companies use "insurance scores" (credit) to determine eligibility for coverage and the rates charged every day.

"offsets any marginal increase you might see in insurance." Most folks would consider a 50% difference in pricing more than "marginal" when a $600 premium jumps to $900.

I've been licensed in insurance since 1989 and have seen the use of credit to set insurance premiums morph tremendously over the years. The algorithms that insurance companies have been using over the years to set a client's insurance score are considered proprietary and do not have to be disclosed to the state dept. of insurance. As such, the algorithm can be surreptitiously adjusted by the insurance company to achieve a goal such as back door rate increases that would require normally require dept. of insurance approval.

[wob]

My son is 17, and we'll be looking at doing something similar soon. I'm thinking that I'll get him a credit card with a low limit to use only for gas and put it on autopay every month tied to his checking account. I'll also tie his checking account to an automatic overdraft LOC. That way, the credit card bill will always get paid, and if he does get into trouble and OD his checking account, I'll know, since I can see his account on my app.

He works and doesn't spend a lot, so I'm not super concerned about him. My daughter, on the other hand...

[WoodieSC]

My son is 17, and we'll be looking at doing something similar soon. I'm thinking that I'll get him a credit card with a low limit to use only for gas and put it on autopay every month tied to his checking account. I'll also tie his checking account to an automatic overdraft LOC. That way, the credit card bill will always get paid, and if he does get into trouble and OD his checking account, I'll know, since I can see his account on my app.

He works and doesn't spend a lot, so I'm not super concerned about him. My daughter, on the other hand...

This is an excellent way to do it. The key, as noted, is to pay off the entire balance EVERY MONTH. As long as you control your spending so that you are able to do this, you can build credit faster by charging more.

I had my wife set up her own accounts and cards, etc, when we got married, so we're listed separately in the credit systems, and have a couple of different cards, but over the past 20 years I don't recall any time that either of our credit rates dropped below about 820, and they're usually a bit higher.

If your kids want to be able to buy anything on credit, e.g. house, insurance, auto, etc, they really need to get to a credit rating of at least 720 or better to get the better rates.

[JJ1965]

My son got a couple credit cards when he got his first part time job. He is 23 now and has used the cards carefully. He had rewards cards, used them monthly and pays them off before they are due, and has never paid a cent of interest. The car we got him in high school was in my name end his, and was paid off early. His credit score is over 800 now. I would recommend it if he is going to be very careful and not go crazy.

I think the main thing is to never carry a balance from month to month. The more available revolving credit he has the higher his score will he.

[trkykilr]

I think its a good idea. Your boys are responsible and won’t run the card up. Start with a $1k limit. If he is responsible, they will offer to increase it to $5k pretty shortly. Let him do it, assuming he has done what he said he would do. Higher credit limits with lower balances/use and timely payment are better for your credit.

[MolliesMaster]

Yes. My first one was a $500 limit. I paid for my gas with it every week and paid it off at the end of the month. Still only have 1 credit card, albeit the limit has gone up some.

They check your credit for just about everything these days even utilities.

[Bad Habit]

Seriously- I started with zero money but good advice- build and protect your credit score and life will be much easier.

I worked and saved money- went down to a finance company and took out a loan that I could re-pay with my savings, paid a few payments then paid it off.
Repeated a few times until I had a great credit score and have protected it my entire life.

Credit is a necessary evil these days and credit cards are a big part of the equation. It's also the easiest part to let get away from you, especially when times get tough.
I got my first CC because you had to have one to rent a car or reserve a hotel room back then- also for dire emergencies.

Your son needs to have a sit down with his banker and plan out how to best build- and protect- his credit, without building debt, while he is going to college.
What type of income source does he have?

[Geetch]

My company even checks credit scores for certain roles we hire for (Accounting, FP&A, etc.).

Credit is a must. If nothing else it'll teach discipline the easy or hard way.

[smitch320]

I took out a share loan in highschool to start building my credit. Borrowed money from myself and paid it back. Credit cards are dangerous in college.