swimcatsmom

Unfortunately they changed the rules so being an authorized user on someone elses card no longer works towards the credit rating.

jym626

^^^^ oooh, thats a bummer, swimcatsmom. When did they change that rule?

jym626

Here's a brief overview of the impact of the new regulations, from the bankrate website 8 major benefits of new credit card law

swimcatsmom

I'm not sure exactly when but I think it was a couple of years ago. We have our kids as authorized users on a card mostly for convenience and emergencies. But we also had heard (Suze Ormon I think) a while back that doing that would help their credit rating. The first time we had an inkling that that would change was when my son got a personal loan at the bank and they told him that the part of his record relating to our card was 'false credit' or something like that. When he told us that I started checking on the web and sure enough they were changing the rules so that being an authorized user was no longer counted in your score.

akck

Another option to consider is a secured credit card. I know credit unions offer them. What happens is that you place say $500 in an account which allows them to have a credit card with a $500 limit. After 6 months it should give them a credit history so they can get a regular credit card.

tango14

When S1 was 16, he got his own checking account. Instead of giving him money, I gave him a check monthly that was the equivalent of money I gave him otherwise (gas, lunch, school fees, etc.). He was responsible for managing it and did very well with it. He also had a debit card with that account. When he started college, I added his name to one of our cards for books, clothes, things we agreed to pay for. Before graduating college, he got another card in his own name for a company he worked for. He still has both. Since ours has a much higher credit limit, I told him to keep it in the event of a serious emergency.

S2 went across company to a band camp when he was 16. I had his name put on another of our cards at that time because I wanted him to be equipped for any unforeseen emergency. He didn't get his own checking account until he was ready to leave for college (with debit card). He knows what accounts are to be used for what expenses and so far has been quite responsible. Sometime before he graduates we will get him a card in his own name.

If you have responsible kids, I think it is a great way to build fiscal responsibility. They both know that the bills come to me and I pay them. So they can't hide purchases. And I do ask for explanations for unusual charges.

dance2nite926

I'm turning 18 soon and was hoping to get a credit card. I've held the same job since I was 14. I wanted a card because I never have enough cash on me to pay for food or gas etc. I also wanted to get reward points for my insurance I pay out of my own money, car repairs, concert tickets, or whatever else I spend a lot of money on. My mom won't let me have a debit card... even though I have over $5,000 saved in my bank account. She won't co-sign with me for a credit card either. I was planning on getting a new bank account with whatever college I go to next year (fall 2010). So I guess I'm stuck getting a debit card through that?

Right now I have my mom's credit card with my name as an additional card holder. I use it to get gas (and she transfers the money out my bank account) or when she tells to pick us up something to eat on my way home from work.

zixxa

Here is some information that may help. There is no way to know exactly how all the new changes will affect credit history. Keep in mind there are 4 ways to help establish credit with a credit card.

Individual Credit – a credit card in the student’s own name based on their own income, etc. They are solely responsible for the debt and the credit history that evolves.
Joint Credit – A card applied for in the student’s name and someone else’s. Both applicants income and credit history can be taken into when granting credit. Both are responsible for all charges on the account.
Authorized User – (Also known as piggybacking) Only the main applicant’s information is taken into account for granting credit and only that person is responsible for payment. The student does get the benefit of the parent’s credit info on this account. If this is used, it is suggested that the oldest credit card with the lowest balanced is used for maximum impact.
Secured Credit Card – Money is placed in a savings account or other secured account and a low limit credit card is issued in the student’s name. The savings account cannot be accessed as long as the credit card remains. These can have some steep fees associated with them so look at them carefully but if you don’t want to be liable for your student’s fiscal irresponsibility or if you have poor credit yourself, this may be the way to go.

Fair Isaac who created the FICO score announced it would do away with the use of authorized users to boost credit scores in 2007. This was due to the abuse of selling good credit scores of some people to people with poor credit. After outcry by both consumers and the credit bureaus, they announced in later 2008 that they would not do away with this practice completely. Although they have not announced exactly how they now use authorized users, it is widely suggested that direct relatives (parents, spouses, kids and their spouses, etc) and same household members will still get benefit of this. Strangers or distant relatives will not.


The Credit Card Accountability, Responsibility and Disclosure Act prohibits credit-card issuers from extending credit to a person under 21 unless one of two conditions is met.

Under one condition, the card issuer has to verify that a young adult has the independent financial means to repay any credit that has been extended. One would think this would have always been the case. And yet, we know that lenders - counting on a parent or some other responsible adult to bail out a young person - have granted credit to underage consumers living off student loans or meager income.

Under a second condition, a young adult could get a credit card if a parent, legal guardian or an individual 21 or older agrees to sign a credit application as a co-signer.

From Michelle Singletary: Protect child from credit-card trap 6/4/2009

So, that means that if your child has their own income, they could still be issued a credit card between the ages of 18-21. Chances are it will be a low level card to match what is probably part-time income. What banks and credit unions will count as income is the question. Banks may choose to be very liberal about this to still get the student accounts. They could do this to seem to comply with the new law. Student loans probably not and money from parents/grandparents probably not. But trust fund disbursements and scholarship money or fellowship money maybe. When my daughter applied for a credit card as a college student, she got a higher credit limit by using scholarship money above tuition amounts as income. She was at the bank talking with the banking officer and the person taking the application for the bank on the phone and asked them if she could count that as income. They both said yes – classified as other income. Your Mileage May Vary.

zixxa

From this article dated 6/24/2008. Piggybacking (Authorized User) information has changed since then.
Adulthood, legal rights and credit cards: Turning 18 with a credit card

Here's how the new adult credit card game is played -- for both parents and for young adults.

Authorized users
When children are authorized users on a parent's credit card, nothing changes with an 18th birthday: Parents remain solely liable for any debt incurred. "A credit card company doesn't take into account the income of an authorized user on a credit card application when issuing the card, so the applicant is liable, but not any authorized users," says Gail Cunningham, senior director of public relations for the National Foundation for Credit Counseling.

So parents, regardless of whether your children are adults, as authorized users the liability runs one way: You are on the hook for anything they charge, but they are not on the hook for anything, whether you charge it or they charge it.

Jointly held cards
If you and your over-18-year-old child apply for a credit card as joint users, you are both liable for any debts racked up on that card. So, if your kid goes to town and charges thousands of dollars for an Xbox 360, video games and an iPod Touch and can't pay, you are on the hook. In a similar fashion, if you rack up the debt and can't pay, the credit card company can go after your child for the entire debt.

Individually held cards
You aren't legally liable for any debts that your adult children incur on their own, even if they are college students without much, if any, income.

Just as you aren't legally liable for your adult child's debt, your child has no liability for any debts you incur on your card.

Piggybacking lives -- for a while
Parents can give their children a leg up on creating good credit histories by including them as authorized users on their credit cards. The practice, called piggybacking, gives authorized users -- children -- a better credit score because a good payment record by parents shows up on the children's credit report

An update on piggybacking from the same website. It also tells you the best way and the best time to take the authorized user off, etc.

Authorized user piggybacking: When should the credit ride end?

And finally, an article from Dec 2008 on the new FICO scoring method and how credit history is being impacted that can be a benefit to all of us, not just students.

New threats to credit scores - MSN Money

zixxa

Defend Your Dollars: Q&A- The Credit Card Legislation This is Consumer Union site.

CU Response: It is CU's position that everyone should be underwritten when it comes to credit. That being said as this next college summer and fall semesters start will be the last open season on college campuses for credit card companies so BEWARE. After February, if you are 21 and over when the law goes into effect DON'T co-sign for your friends.
This provision is not retroactive. If you are under 21 and currently have a credit card you will not be subject to the new provision with respect to your current card. If you apply for a new card, you will have to show income and/or obtain a cosigner.

So, for those who will be attending college in the fall, you may still be able to find those credit applications around campus. And, the marketing will be heavy telling you that this is your last chance.

Even if you get a credit card on you own income after February, these following provisions of the new law may limit what you can get

Limits the credit line from any one credit card to the greater of
20 percent of annual income or $500, unless there is a co-signer;

Limits the total credit line from all credit card sources to 30
percent of annual income, unless there is a co-signer;

So, parents, as you evaluate whether or not to help your student get a card now or later, take these things into consideration. No legal changes should rush you into helping a financially irresponsible child get a credit card. On the other hand, if your child has been responsible and you think a credit card could benefit them because they may be going overseas, etc before 21, then now may be the time. Cards are still being issued to students on the old, no income, no cosigner basis.

kriket

The nice thing about a joint credit card/authorized user, is that then you are able to talk to your credit card company about billing issues. If it's in their name only it's up to them, even if you are paying the bill.

yan19454

Do you know which bank issue credit card for young adult 15 years old ? Thx.

toadstool

BofA, preferred financial institution at DD's prep school, flatly said that there was no way to issue a credit card to a minor (in the minor's name) because a minor cannot enter into a contract. Debit card - yes; piggy back- yes; credit building credit card - no, not before, not now, not after February.

The school's BofA contact said that she was being besieged by calls from parents seeing if they could squeeze in under the February 2010 deadline.

She had no solution to offer for 18+ students who formerly could get a BofA StudentAdvantage card but will not be able to after February. The phrase catch 22 came up.

So BofA is not a solution - Anyone heard from any other institutions?

SlitheyTove

We belong to two credit unions, both with teen programs. One will issue credit cards (with over 21 cosignatory) to teens starting at age 16. yan, try checking local credit unions to see if they've got something similar. Below 16, the only option I see is a checking account with an ATM card.

ellemenope

Went to BofA today to make sure all banking requirements were OK. D has a checking & savings account that she set up with them when she was under 18. Because she was under 18, I had to be on the account also.

She's 18 now. We asked about getting her a credit card--she applied on the spot for the Student Visa card with a $600 limit. I mentioned that I understood that I would have to co-sign for the CC--BofA rep said no need for me to do so. Interesting...

So we'll know in 10 days whether card will de approved or denied. I'll let you know.

What was cute was the bank officer gave her a lecture about credit cards and building credit and the concept of wants vs. needs. Credit cards are for needs, not wants. Pay your bill in full every month. Don't use your cc to get cash advances-there are expensive fees attached.

A bit in kind like the lecture you might expect to hear from your pediatrician on that last visit before going off to college--about excessive drinking, stds, drugs, etc.