A Question About Credit Scores

[SKKY]

So, I'm trying to do something for my soon-to-be 16 year-old, and I'm getting conflicting information. I called the bank to find out about a secured credit card so he can start building his credit score. They told me I could do that, or I could just add him as an authorized user on mine, and since I have a high credit score, that will transfer to him in approximately 6-9 months. That sounds kinda like hacking the system, and to be honest, didn't seem legit.

Does anyone have any insight?

[stopdiggin]

1. doesn't sound right to me

I don't think that credit score is going to 'transfer' to him. (but perfectly willing to be corrected)
My own take is that the kid needs his own account - lower credit limit (as only makes sense) - and he's also responsible for online banking and paying monthly billings. If he's ready for the responsibility - then make him responsible.

[MsLeopard]

2. I gave my daughter

A credit card of mine, with her name and SS# associated with it, when she was planning her wedding. I made payments until after the wedding and then they took over. All of it went on her credit and made her look very good when buying their first house.

[SKKY]

21. Excellent! And really all I'm trying to do is give him a leg up...

...for the eventuality that he will one day get his own credit card. To be honest, he doesn't even know I'm doing this, nor will he necessarily.

[brush]

3. Your first thought seems right. Let him build his own credit score.

If he proves respondible, job well done. If he's on your card and is not, it can affect your score.

Department stores, and even stores like Sports Authority offer credit cards. That might be a route. I started years ago with a Macy's card and eventually on to VISA.

[Johnny2X2X]

4. What does a 16 year old need credit for?

I highly advise against giving credit cards to young adults at all. And secured ones are a bad idea all around IMO.

He needs to credit until he buys his first car, but you'll be cosigning that for him anyway.

The best way to have good credit is to stay out of debt.

[tritsofme]

8. I think 16 is young, but there is nothing inherently wrong with credit cards.

Especially when paid off each month and used to accumulate rewards.

[Johnny2X2X]

11. And how many teenagers are going to have the discipline to do that?

My guess is less than 1/100th of 1 %.

And CC companies make mistakes, overcharge sometimes, delay recepit of payment. Just like any other company issuing and processing bills, mistakes happen, I've dealt with errors from banks myself.

My credit rating is 822 and I don't carry any revolving debt, zero.

[tritsofme]

13. It's a good way to learn financial responsibility.

Our kids started building their credit history with credit cards at 18, they mostly stayed in a drawer or the balance was paid each month.

Like us, they have scores in that similar range as well.

We pay off cards each month, and get worthwhile rewards, it makes sense to use credit responsibly.

[Hassin Bin Sober]

18. If the child has a good established payment history and a high score he can probably get ...

… a car loan without a co-signor.

I would rather add a child to a credit card than be attached to extra 4 wheel liability rolling around town. Most people don’t realize being a co-signor also means you are a co-buyer in most cases. When I was in the business none of the prime lenders wanted anything to do with tru co-signing or guarantors.

I’m old enough now where I’ve seen people get sued for big bucks over accidents.

[SKKY]

22. He doesn't, and he doesn't even know I'm doing this...

...nor does he necessarily need to know. I'm just trying to give him a leg up for the eventuality of when he actually does apply for credit (i.e. A car loan is the most near-term application).

[sarcasmo]

5. I added my niece to my card with a low limit, super easy and legit.

[tritsofme]

6. It will help his credit score in the near term, if by nothing else

than increasing his available credit, but it won’t really help him build credit history, like that secure card in his name will.

[MineralMan]

7. I'm pretty sure that 16 year olds still cannot execute financial documents.

So, if he gets his own credit card, you will still have to take responsibility for it. So, it's a wash, really

[Igel]

19. My kid turned 18 last year.

Away to college, I could get him my credit card (my account, his name on the card) or get him his own card (risky--the companies will crank up the credit limit way quicker than a co-signer is comfy with).

Talked to the bank manager who pointed out that my account number = my credit score; it would do zero for his credit history and if he screwed up would screw up my score.

He got a "trainer" card. My account. He did well; he gets his own card this fall, I'll cosign if necessary (but one parent's name will be on the account so an allegedly more responsible can make sure he doesn't do something stupider than expected).

[SKKY]

23. For sure. I'm just trying to give him a leg up, and ahead of the curve...

...for when he eventually does apply for credit on his own (i.e. purchases his first car).

[thatdemguy]

9. Back when I had to fix mine,

My father got a new card and added me as an authorized user thinking it would transfer to me some. Well what ever company it was had a line in the contract that an authorized user did not get reported to the credit places.

Best thing as someone who had screwed up credit, get a card with them as a co signer and dont let them have the card. Heck dont even need to carry it yourself. The 3 major things that effect score, age of credit lines, using less that 30% of the total limits and paying on time. Having a card sitting unused in a dresser does all three.

[Renew Deal]

10. Does that give him your credit limit?

[SKKY]

26. My understanding is it does...

[Raftergirl]

12. Adding your kid as an authorized user is done all the time to help them build credit, but

both methods are used. Just depends on which one you think will be more beneficial for your kid.

We had my kid apply for a secured CC from our credit union when he was in college. He had an on campus job and worked in the summer so he was responsible fo paying the bill.

He has always been very good with money so this worked for him.

If you add your kid as an authorized user you do not have to give them their own credit card, nor do you have to allow them to use it.
https://www.bankrate.com/finance/credit-cards/child-authorized-user-on-credit-card/#how-long

[MichMan]

14. Lot of difference between a college student over 18 and a 16 yr old.

[Raftergirl]

15. True. We could have done it when he was in high school as he had a part time job his senior year,

but we didn’t think it was necessary at that time. There was no reason he needed to be an authorized user on any of our credit cards either, while still in high school.

I know he has stellar credit now (he’s 29) that he has established all on his own.

[SKKY]

24. Excellent! And that's really all I'm doing here. He doesn't even know, nor will he use it...

...without my and my wife's prior approval. I'm really just trying to give him a leg up for when he eventually does apply for credit on his own (i.e. Applies for a car loan).

[W_HAMILTON]

16. I would say get him a secured card.

It would also help you keep a limit on what he is spending while still letting him begin to gather a credit history, which is all you are looking for right now. A 16-year-old, or, heck, even an 18-year-old shouldn't need "good credit." Obviously you don't want them to have bad credit, but at that age unless he is completely off on his own, it's not going to be a big deal. The main thing is focusing on starting to build a good credit history for him. And a secured does that without any of the potential downsides of letting him be an authorized user on your cards.

[mercuryblues]

17. Get him a debit card.

with your name on it. Make sure you "select the do not allow overdraft" on the application.

When he is 18 he can take out a small loan and you co-sign for it. Have the payments automatically withdrawn form his debit card account.

[SKKY]

25. He already has a debt card in his name (It's how we give him his allowance)...

....I was really just trying to be more expeditious and get this moving quicker.

[NowISeetheLight]

20. Added Spouse

When I married my husband two years ago I added him to four of my credit cards as an authorized user. He had no cards and a 600 or so score. Now all four show on his report too and he's in the 700s.