Is the purpose of the credit card in the student’s name simply to get them started with building their own credit score, or is there some other reason? D is on our (not often used, paid in full) card as an authorized user, and she has had her own debit card linked to her checking account since she was 14. She’ll be a Freshman in college this fall and I don’t really see a reason for her to need her own credit card – she has mine for emergencies or to use when I OK a purchase, and her own debit card for anything else. What am I missing?
Student denied for Capital One card due to being authorized user on parent credit cards. What to do?
@Amkngk, you’re not missing anything. We were at exactly the same place when our kids were that age.
We suggested older D get a Capital One card when she was living in Denmark obtaining her Master’s, because it was the only card that didn’t charge an exchange rate when used outside the USA.
Older daughter wanted one because she is planning a trip to Europe for which she is paying with her own money, and didn’t want to go through the extra step of reimbursing us.
Thanks everyone for the tips. Please keep them coming.
@Amkngk the purpose is just to help her build credit in her own name. We also had her start an IRA when she was 17 and keep making contributions to it.
@FlyMeToTheMoon thanks for that tip. When you calculate the income you give her, I assume we’re not talking about room and board on campus? That would be a big number and pump her income immediately. We don’t give her a specific monthly allotment for expenses and she pretty much uses her earnings for many of those day-to-day items, but we do pay for various items like plane tickets, etc and I’m sure we could go back and reconstruct an amount from 2016. When she applied to Capital One she only listed the 4K in earned income from her campus and summer jobs.
@Corinthian, yes she included the room and board we give her. When she only listed her own earned income, she was denied. When she added the room and board we give her, presto! Approved! And with a $3,000 limit! I know…it seems crazy. But it worked.
I don’t know how older daughter knew to do that the first time, but apparently that’s the deciding factor.
More than likely, the issue your daughter is facing is that she has basically a temporary job…with minimal income. The credit card companies really tightened up their practices after the 2008 crisis. Before that, they issued credit cards to folks who just should not have had them.
Really, she can start “building her own credit” once she has a real job after college graduation.
OK well if she includes the room and board we pay for that would be an additional 15K on top of her 4K in earned income, plus I’m sure we pay for at least another 1K in expenses (and I assume we’re not including tuition which would make the number super high). I can see that it would make a big difference if her income is consider 20K instead of 4K.
@Corinthian, exactly.
Both girls are still sleeping, but when they awaken, I’ll verify to be certain what exactly second daughter included the second time when she was approved. I’ll report back.
@thumper1 D and I did stop by our local Chase Bank branch yesterday afternoon and talked to a banker. He was the one who helped us review her credit report and ascertain that it was showing balances that are from the parents’ cards. His opinion was that the issue was the card balances on the credit report rather than the nature of her income. I’m going to help her draft an explanatory letter to Capital One about how the card balances are ours and supplementing her income as suggested by @FlyMeToTheMoon and see what happens. I think we’ll also close at least two of her authorized user accounts and see if that helps. We may also look into applying for a card from Chase, but our research suggests that some cards are more friendly to student applicants than others and Chase is in the less friendly camp. The Chase banker was certainly willing to help her submit an application but basically we ran out of time and had to go on to other errands.
Just make sure she reads VERY carefully the payment deadlines for those Capitol One cards. We steered both of our kids away from them.
Our experience:
Neither of our kids were ever authorized users on our accounts. Both got their own credit cards directly from the credit union where they had savings accounts the summer before heading to college. For D she had no issue because she had a job (they required a paycheck for proof of income, so the suggestion unthread of putting back in our contribution would not apply, their app specially said it must be their own source of income). For S we simply used a secured card until he had a paycheck.
I wanted my D to build up credit because she will have to live off campus by senior year, and if we don’t have to cosign an apartment lease, I would prefer not to.
She is also looking at taking out grad plus loans for pharmacy school, where credit worthiness matters?
Lastly, she might have to buy a car at some point, and we are not planning to cosign a car loan, so she needs to have good credit for that.
@mommdc check the policies where your kid goes to college. In some rental markets, ALL students need a parent to sign the leash…because the landlord is looking for income…not credit score.
My daughter is in grad school. She has a credit score in the 800 range. But no income…at all. No one would rent to her…at all…without guarantor. Because she didn’t have sufficient income to pay the bills herself.
In some markets, the renter needs to have income MANY MANY times the actual,rent amount.
Credit score might not matter…at all…if income is insufficient.
My older son was an authorized user on my card when he was in college and had a student credit card. When he was buying his townhouse few years after graduation, we had to consign on his loan since his income was not enough to be approved. Established credit history can take young adults only that far.
Yes, that is definitely something to consider.
I guess we will see if credit rating will be enough to qualify for a lease with her income at the time.
She will be paying for her last two years of pharmacy tuition/housing with loans and savings (if she doesn’t get scholarships), she should be earning quite a bit as a pharmacy intern in the summers.
Mainly I didn’t think it would hurt to try to establish credit earlier than college graduation. Especially for a car loan later in the future once she earns a good income.
Same issue - S2 was an authorized user on my credit card that does have a balance and was denied for a credit card by Chase - this was after college graduation and he had a job. He also has a student loan - that appeared as 4 seperate student loans on his credit report. We called Chase together - escalated to a higher up - explained that he was only an authorized user on my card - which was obvious as it was opened when he was a toddler. Still denied.
We went in person to Suntrust - where he banks and they can see his payroll deposits - and he was approved.
My advice is to apply in person where you already have a banking relationship.
@Corinthian, verified that younger daughter added money we give her for room and board the second time she applied. She mentioned that that is permitted per Capital Ones’s rules.
@Corinthian, I would call cap one. Initial denial is usually based on a simple algorithm and most issuers have reconsideration departments that can sort through these issues. In most cases, a decision can be reversed without an additional hard credit pull. If you wait too long, they’ll want to do another hard pull to reconsider and that’s not helpful to her credit profile. Also, I’m not sure about cap one or student cards, but cc apps often ask how much household income is available, which allows students and non working spouse to enter all family income.
@politeperson she did call. I wasn’t on the phone with her but she said she was transferred around several times and wasn’t sure they understood what she was saying about being only an authorized user on the accounts on her credit report. The response as reported by her was that she had to take that up with the credit bureaus.
Part of the reason my son wanted his own card was that he was using mine to buy concert tickets and the like, and then we had the back & forth of reimbursement. I also wanted to have him get used to handling his own banking and how the mechanics operate: depositing checks (payroll or gifts), managing checking & savings, deciding how much to put in Roth IRA.
@corinthian I think it’s worth calling again and raising the income issue, perhaps with you available to get on the line. Good luck!