There’s so much emphasis on credit scores these days–commercials for Credit Karma, etc. My S, who has been working for the same employer for 6 years and lived in his community for longer than that, just tried to lease a car and was told that even though his credit score was more than adequate, his credit history was not. Like many in his generation, he rarely if ever uses a credit card, depending on his debit card for virtually everything, and his rent for the place he lived for over 5 years was paid to the owner of the house, who had no reason to report his transactions to any credit agency. He had no student loans in his name. I can imagine other young people being in this position.
When I was reaching adulthood, the common wisdom was to open a credit account, even if just at a department store, and use it for a few years, always paying in a timely fashion, in order to establish a credit history. I guess that advice still applies, though I would also recommend that credit cards be used on a regular basis anyway, since they offer protections that debit cards don’t. And perhaps having a small student loan even if it isn’t needed is another way to establish credit from an early age.
Oddly, though he doesn’t want to buy a car, S will be able to obtain a car loan without a problem, and I don’t understand why the criteria would differ. I did suggest he try other car models, since the leasing companies my vary in their requirements.
D1 used her one credit card to buy everything in order to get points. She is the queen of getting triple points on purchases. She pays off the balance every month. She just recently got her own AmEx platinum to get more points (100K).
D2 just graduated this year. I actually made her get her own credit card recently. She was happy to get sign on points. She will also be putting most of her purchases on the card.
Your son should check with different financial companies for the lease, even for the same model.
I absolutely do not get the point of a debit card, as opposed to using a credit card and paying it off every month.
Like oldfort’s daughter, my kids have their own credit cards and get points or cash back. They were on our credit card through college, and I think when they were either juniors or seniors we told them to get their own cards. They each have two cards, a Visa and an Amex.
We and our kids like the “free” benefits we get from CCards. Both kids have gotten many free flights compliments of our CCards, which is quite valuable to us. They pay off the ill every month and none of us have any interest or finance charges, so can’t see any reason not to get these benefits. All of us have excellent credit scores even tho D has still never held a fulltime job in her life!
We face a similar dilemma. One son has a job, but absolutely no credit history. He got rejected for a credit card a while back, and I am guessing with his 1+ year work history now he probably could get a card, but his money/spending habits make getting a credit card risky so I am not encouraging him to reapply. Maybe I should.
@NJres - you could put your son on your credit and transfer your credit to him. I had both of my kids on my AmEx, and it showed up on their credit report.
When we updated our cell phone plan we put our phones in my sons name but I pay the bill, I’m hoping this helps with his credit history. (Plus he has one credit card)
We put both of our kids on two of our credit cards as soon as they started driving. I wanted them to have a safety net. Each kid also had a savings account with myself as a co- owner. The savings account was used to transfer funds as needed. They’d then transfer the $$ to their individual checking accounts. H and I have both personal and business relationships with the bank and the CC companies.
D and her fiancee just rented an apartment. Our credit history transferred to her and the owner was not only very comfortable but floored that someone at the age of 24 had such a credit rating. Her fiancee on the other hand only had a low limit student CC and a much lower credit score.
Both S and D have had occasions where they needed assistance at a bank branch. Each time the teller would pull up their history - which is tied to ours - and stammer that they needed to talk to the premier/elite/private banker. They have had overdraft fees, check fees etc. waived.
Honestly, I didn’t realize at the time how much their credit ratings and bank treatment would benefit. It’s been a nice benefit.
All that said…we have trusted our kids completely. They understood from the get-go what was at stake. They never abused the privilege.
Is there any reason to use a debit card for offline transactions (typically through Visa or Mastercard networks) compared to using a credit card and paying the entire bill within the interest-free grace period?
The credit card paid off within the interest-free grace period has some advantages:
When fraud happens, the bank's money is missing instead of your money.
Builds credit history.
Rewards programs can be better on credit cards.
Indeed, having Visa or Mastercard capability on a debit card is useless enough to me that I asked for PIN-only debit cards on bank accounts (mainly for getting currency from ATMs) to reduce the risk of fraud by Visa or Mastercard number.
Our kids have had CCs with me from the time they started college. They have credit histories older than they are and top credit scores because H and I do. They have not needed much assistance at any banks. It’s nice that your kids have gotten a boost from your credit histories.
D got an AmEx Costco CCard when she was shopping with me at Costco one day and we Wanted to help the guy who was taking applications. He was shocked that she was instantly approved and got a higher credit limit than him, even tho she was unemployed at the time.
When we got my son a car in college we put his name on it too, then he got a credit card through usaa and we advised him to not ever go above 50% of the limit and pay it off each month. He now has excellent credit and a history. We decided to not pay the car off quickly, but pay on it for years.
A top credit score is 850. My new college graduate has one in the low 700’s. When she recently rented an apartment - the realtor was very impressed with her credit score.
My daughter got her own bank account in HS (with me on it and an ATM/Debit card). She has had a credit card for several years (got one when she was in college) and now got a second one this past year. She pays the full balances every month and uses them pretty regularly (rather than carry a lot of cash).
When she got the credit card in college the person at the bank filled out the application with us and included my monetary support (as she was jobless at the time). The banker knew what would be approved (I had tried some on-line applications and they were all denied.) She started with a very low credit limit and has increased it over time (when she was employed).
Yes, we have worked to manage her banking/credit card use so that she would have a strong credit history and score. This is something you need to do with/for your kids starting in HS.
It depends which credit score company when it comes to credit scores, for some it is 850 and others maybe 800, but they would let you know if it Excellent or Very Good.
I didn’t let my kids have their own credit card until after college, when they were self supporting. My kids’ bank accts are still tied to mine so they could enjoy various perks.
I put D on our Amex and Visa cards when she started college, and just last winter (2 years into full-time work at a nice salary) she applied on-line for a Chase credit card and was rejected for not enough credit history, so I’m not sure that just having her have a card on our accounts had much effect. She went into her Chase branch and spoke to the banker who’d helped her set up her checking account when she’d move to NYC, and he looked at her checking account with all the auto-deposits from her salary, looked at her healthy savings balance, and approved her on the spot for the card she wanted. Not sure why that worked since she’d applied originally with credentials from her chase account.
An affluent friend who is in her late 60’s had shoulder surgery this spring and needed a recliner to sleep in for a month or so, but didn’t want to permanently own a recliner. She and her husband went to the rent-to-own store to get one of the big recliners, and didn’t tick off many of the desired credit categories: monthly mortgage or rent? ($0, paid off), monthly car payment ($0, paid off), monthly or weekly salary ($0, retired) – they insisted that she provide four personal references before delivering the recliner. So much for having a stellar credit score and a bunch of credit cards.
I agree that being an authorized user on your card is not always enough to get a credit card. My son has been on my card (I have had the same card since 1987) for the past 8 years. He was denied by my company and also his bank and he has $15,000 worth of savings in his bank acct. When he applied, he was employed in a full time job for over 6 months. He ended up getting a secured card from his bank and they have indicated that he should be able to get a “real” credit card after a year of using the secured one. It was a real hassle for us at first because he was traveling for work and needed a card for hotel rooms. Initially he would use my card which he was an authorized user on, and then he would have to reimburse me once his expense reports were processed
Our D has 2 CCs that we know of–Sallie Mae MCard and the new Costco Citi Visa. She has still never had a full time job. Have no idea how many CCards S has–probably well over a dozen–he has excellent credit.
What’s the benefit / point of having a dozen credit cards? I’ve taught my kids - get 2 of the majors (MC/Visa/Amex) and don’t open yourself up to cc fraud by getting individual store cards; they’re just wallet clutter.
There are benefits to some store credit cards, like Macys for example. You get an addl 20% for most sales, one just have to be sure to pay it off immediately, which you can do right at the register after you make your purchase.
I don’t think credit rating transfers to the child just because they have a card on their parents’ account. They have to have their own account. For my two older ones, they got a student account with Discover and expanded from there. One perk is that Discover tells you your credit rating every month.
Still, one of them had trouble renting an apartment because her roommates had no credit history. They thought they were doing the right thing by not using their credit cards. In the big picture, it’s good that they were avoiding cc debt, but credit needs to be used to get a history.