Best practices for establishing teens' credit history?
Apr 23, 2017, 8:00 am
#16
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Apr 23, 2017, 9:01 am
#17
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This is a marathon, not a sprint.
A few months [1] after your kid turns 18, have her pull her credit report and see what it looks like before going past AU. If a credit application asks for household income, and they have access to that, or the first job of their career has started and they have a salary, then it might be a good time to apply for a card, use it for a year to show a track record before adding another card.
Anyone is entitled to a free credit report (CR) [2] once a year from the credit bureaus. This won't show a score, but it will show if the AU accounts are showing up. From there, you have an idea of how 'thick' their file is. Once it's got some data on it, then maybe try Credit Karma again to get an idea of what the score might look like. If you request a report from Transunion (TU) and the data isn't good, you can then request from Equifax (EQ) or Experian (EX) in a few months, after which it should have new data on it. If you request TU+EQ+EX at the same time, you are done for a year compared to spacing them out say 4 months apart.
Applying for credit will cause a hard pull, which will drop the score a few points. This hit happens whether or not the card application is successful. This is why you want the score and report in hand before an application. If the score pulls at a low number, you don't want to reduce it lower with a hard pull from an doomed application.
Qualifications for a premium card may not be different from the non-premium cards excepting cards reserved for customers with significantly large assets at the bank. Reports are requirements for an American Express Platinum charge card are same as for the green version.
The "no significant income" would probably be the issue here, no matter the card.
Disclaimer: this post includes financial advice from a anonymous poster on the Internet.
[1] The saying goes that CB's report bad data over a 1000 Gigabit per second network instantly, but good data is recorded with a quill pen on parchment, then placed on a stagecoach pulled by two glue-factory nags. CR's can be 2 months behind, reporting February data on a April report. It might take a month or two for the AU information to turn up on on the other CR.
[2] https://www.consumer.ftc.gov/article...credit-reports references the site to request a credit report online. I'm including the .gov site and not the direct link in case the link changes. Besides the web site you can write a letter on paper via the US Mail. The CB's tend to have sample letters online.
A few months [1] after your kid turns 18, have her pull her credit report and see what it looks like before going past AU. If a credit application asks for household income, and they have access to that, or the first job of their career has started and they have a salary, then it might be a good time to apply for a card, use it for a year to show a track record before adding another card.
Anyone is entitled to a free credit report (CR) [2] once a year from the credit bureaus. This won't show a score, but it will show if the AU accounts are showing up. From there, you have an idea of how 'thick' their file is. Once it's got some data on it, then maybe try Credit Karma again to get an idea of what the score might look like. If you request a report from Transunion (TU) and the data isn't good, you can then request from Equifax (EQ) or Experian (EX) in a few months, after which it should have new data on it. If you request TU+EQ+EX at the same time, you are done for a year compared to spacing them out say 4 months apart.
Applying for credit will cause a hard pull, which will drop the score a few points. This hit happens whether or not the card application is successful. This is why you want the score and report in hand before an application. If the score pulls at a low number, you don't want to reduce it lower with a hard pull from an doomed application.
OTOH, would Chase approve an 18 yo with limited credit history and no signicant income for a premium card? I'd imagine not..
The "no significant income" would probably be the issue here, no matter the card.
Disclaimer: this post includes financial advice from a anonymous poster on the Internet.
[1] The saying goes that CB's report bad data over a 1000 Gigabit per second network instantly, but good data is recorded with a quill pen on parchment, then placed on a stagecoach pulled by two glue-factory nags. CR's can be 2 months behind, reporting February data on a April report. It might take a month or two for the AU information to turn up on on the other CR.
[2] https://www.consumer.ftc.gov/article...credit-reports references the site to request a credit report online. I'm including the .gov site and not the direct link in case the link changes. Besides the web site you can write a letter on paper via the US Mail. The CB's tend to have sample letters online.
Apr 23, 2017, 5:01 pm
#18
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Apr 25, 2017, 9:58 am
#19
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Lots of good info on this thread already, I'll just add an anecdote:
I recently went through this exercise with my 19 yr old Daughter. She has had credit cards before, one as AU and one as primary. She also has had a debit card for probably 3-4 years. We cancelled the credit cards when they were up for renewal, and she started using one of ours, which was a pain doing constant reimbursing (in particular seemingly constant use of Uber).
So I helped her apply for Citi DoubleCash over winter break but to my surprise she was denied. I assumed since she'd had credit cards before she would be considered credit worthy. So I created an account on one of the credit report sites, and it showed that her score was something like 640- too low for the DoubleCash.
So my next move was to add her as an AU to one of my cards. This worked initially, and her score jumped up to a ~720. Unfortunately I chose a card that I often maxed out and had a low limit- 10K. The next month her credit utilization went to ~90% and her score plummeted to ~620.
So I removed her as an AU from that card, and added her to another card that I rarely use. It took about 2-3 months for the old card to drop off and the new card to show up. Once this happened, her score went back up to 700+. We reapplied for the DoubleCash and she was approved.
So if you are using the AU trick, make sure that you use a card that has little use and as high a credit limit as possible. Also from what I can tell the account age does factor into the average age of credit component of the credit score, so add her to one of your older cards if possible.
Her debit card does not show on her credit report. Interestingly, each yearly Stafford loan she's taken out for college does show up- it will impact average age of credit negatively for a while, but there's nothing you can do about it.
I thought about having her apply for Chase cards due to 5/24 but she won't put much spend on her card and I feel like she should probably wait until she it out of school to really get into miles & points if she is interested. She'll be under 5/24 by then I hope.
Good luck!
I recently went through this exercise with my 19 yr old Daughter. She has had credit cards before, one as AU and one as primary. She also has had a debit card for probably 3-4 years. We cancelled the credit cards when they were up for renewal, and she started using one of ours, which was a pain doing constant reimbursing (in particular seemingly constant use of Uber).
So I helped her apply for Citi DoubleCash over winter break but to my surprise she was denied. I assumed since she'd had credit cards before she would be considered credit worthy. So I created an account on one of the credit report sites, and it showed that her score was something like 640- too low for the DoubleCash.
So my next move was to add her as an AU to one of my cards. This worked initially, and her score jumped up to a ~720. Unfortunately I chose a card that I often maxed out and had a low limit- 10K. The next month her credit utilization went to ~90% and her score plummeted to ~620.
So I removed her as an AU from that card, and added her to another card that I rarely use. It took about 2-3 months for the old card to drop off and the new card to show up. Once this happened, her score went back up to 700+. We reapplied for the DoubleCash and she was approved.
So if you are using the AU trick, make sure that you use a card that has little use and as high a credit limit as possible. Also from what I can tell the account age does factor into the average age of credit component of the credit score, so add her to one of your older cards if possible.
Her debit card does not show on her credit report. Interestingly, each yearly Stafford loan she's taken out for college does show up- it will impact average age of credit negatively for a while, but there's nothing you can do about it.
I thought about having her apply for Chase cards due to 5/24 but she won't put much spend on her card and I feel like she should probably wait until she it out of school to really get into miles & points if she is interested. She'll be under 5/24 by then I hope.
Good luck!