Let me start by saying that I recognize that this is a total first world privileged princess problem, but here goes. Our 20 year old D was just turned down by Capital One for a student credit card, which was her first attempt to get a credit card on her own. The reason given was “proportion of revolving account balance(s) to income is too high.” D has about 4K in annual income and no debt, but when we checked her credit reports we found that the credit reports all picked up debt that is owed by us (the parents) on a couple of credit cards where D is an authorized user. By way of further background, we parents pay our credit cards off every month and have excellent credit, but we also tend to carry somewhat high monthly balances and have several cards that we use based on which gives the highest reward for various purchases like gas, groceries etc.
What’s the best approach for D to be able to get a credit card? Have her write to Capital One, write to the credit agencies, or all of the above, to explain that the debt that appears on her report is not her personal liability? Worst case scenario we could close her authorized user accounts, but wonder if that is necessary.
Just to further clarify, D’s credit report is picking up not just her charges as an authorized user on our accounts, which would be pretty minor (occasional gas and groceries) but rather the total balance charged by all 3 of us (me, H and D) on the credit cards in question.
Capitol One denied me a card when I was in my mid forties because they didn’t like my mortgage arrangement (had a bubble at the end). I couldn’t believe it. My credit record was spotless – literally there couldn’t be a better credit risk than me. So it isn’t surprising.
Does she have a bank account someplace? Check there.
When S2 applied for a mortgage, the fact that he was also on our credit card came up, and at that moment in time there was about an $8K balance on the card. (We also pay in full; we were in the middle of kitchen renovations, so the balance was high.) It wasn’t an issue for him getting the mortgage – he had a good income and no other debt – but we took him off the card immediately. That’s my suggestion.
The 4K in income I referenced in my original post is income D earns from a combination of campus jobs and summer jobs. and will hopefully be higher in 2017. She does have a checking and savings account at Chase Bank so we can probably suggest she apply there. But I agree that we should also take her off of high balance accounts as an authorized user and keep her on at most one low balance account.
I got my daughter her first credit card by her personally applying at the bank where she already had a student checking account with a debit card. The bank employee knew how to answer the questions properly to get her approved (which I wouldn’t have known). She did not have a full-time job at the time - was a full-time college student - but did have income that year (from an internship). About a year later, based upon that bank visa card, she got approval for a discover card also. Before going to the bank we had tried running through a few on-line applications which all said she would be denied.
We have a similar story to the OP but with a different result. Son had no problem getting a card in his own name summer after freshman year, even being an authorized user on one of our cards (which has a balance that is paid off monthly). His card is through our bank where he has a student checking and savings account, and the card is considered a student card. It’s not Cap 1 - think they are the issue here
We got D’s first credit through the bank where she has an account. They’re usually more willing to extend the relationship than a completely new 3rd party like Capital One or other bank.
Our D is an authorized user with me on a card with a low credit limit that is paid off every month. We were shopping at Costco and they begged her so she applied for an AmEx credit card and said to indicate any funds paid on her behalf by us as part of her income while a student, so she did and was instantly approved with a higher limit than the Costco employee who got her to apply.
When Citi took over Costco CC users from AmEx, she got that card. AmEx has been trying to get D to apply for another of their cards but we’ve ignored it so far. She also has a Barclay MCard with H that she uses for groceries and pays off every month.
S was an authorized user with me on one CC that I’ve had since before he was born, so he also shares my credit history. He didn’t apply for any CCs until he had a full time job and now gas about 30 of them, I believe. He likes getting signing bonuses. The credit card issuers are amused that his credit history is older than he is!
All of us have high credit scores and pay off the balance every month.
Happykid is on our Visa, Discover, and Amex. She got her own Visa through the credit union where she does all of her banking last year. To open that, she needed to guarantee it with $x in a separate account. Sorry I can’t remember the technical name for that kind of card. As her history grows, and her income grows, they will raise her limit and eliminate that restriction.
Son applied for CC with Citibank when he was 19. Citi denied his initial request, but when he called back, they steered him toward a different card that only offered a $1000 limit. Citi increased the limit to $1500 after six months of prompt payment history.
Perhaps the card your D applied for was beyond her credit worthiness? His summer & Jan earnings were in the range of your D’s earnings. He was also listed on a couple of my accounts, so he had established credit history at the time he applied.
The Citi card is Citi Thank You Preferred. No annual fee and a fairly basic rewards program. It has worked well so far.
@Corinthian, our daughter had the exact same issue. So when older daughter, who has had a Capital One card for several years, came home for Christmas break, she helped younger daughter reapply. This time she included the money we give her for monthly expenses as income. She was immediately approved.
Older daughter said when she applied, she included the money we gave her as income. That seems to be the key.