<p>Getting a cell phone plan, for example, is practically impossible without credit history.</p>
<p>You can easily get a pay as you go cell phone with NO credit history at all…you just pay as you go. If you do this with a major vendor (ATT or Verizon for example), after a while they will very willingly convert you to a two year plan.</p>
<p>^ true, but it costs twice as much as the basic plan</p>
<p>fyi - re credit history – it is my understanding that it used to be the case that someone could get a credit history simply by being listed as an auhtorized user on a credit card account – ie that they got the advantage of the credit history for the entire card. it is my understanding that this changed recently and someone only builds a credit history for their own usage.</p>
<p>re importance of credit history – some auto insurance companies take credit rating into account in setting premiums. credit history can affect not simply whether someone will get a car loan, but what interest rate they will pay (same for other loans as well, but a car loan is probably the one a recent grad is most likely to take out) – the cost difference can be substantial. given the recent economy, credit ratings are being used for more and more things – people with higher credit scores pay less in a number of circumstances.</p>
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<p>I am with oldfort on this one. I guess if we as parents stay healthy, we can co-sign whenever we need to. And I am hoping that will be some time after graduation.</p>
<p>We would prefer not to cosign on loans with the kids (well, they arent’ “kids” anymore). Its time for them to establish their own financial record and take their financial responsibility as their own. There was a terrible story on the recent CNBC show about college debt where a family owed $80k as co-signers on their son’s loan. Sadly their only child, this son, had been killed in an automobile accident before he finished school.</p>
<p>I really don’t anticipate co-signing on loans, and child number one will graduate without debt. My point was in response to having a credit history to buy something after graduation. If I need to co-sign for the first car becaseu DD didn’t have a credit card in college, I will.</p>
<p>re importance of good credit – [The</a> Importance of Good Credit - Why Good Credit Matters](<a href=“http://credit.about.com/od/credit101/a/creditmatters.htm]The”>5 Reasons Why Having Good Credit Is Important)</p>
<p>as parents, its easy for us to think that we can make things “better” for our kids – such as co-signing – but there may well be situations where we just can’t and they will have to stand on their own credit – and pay accordingly. when my oldest child was real world apartment hunting, i read info about what type of financial background would be needed – one thing mentioned was that some landlords would not accept out of state guarantors on a lease. does that mean your child will be homeless? no, but might their options be limited, or the cost be greater? yes.</p>
<p>its hard to predict how things will change as a result of the new law that limits credit cards to those under 21 – as a practical matter this will result in more kids graduating college without a credit history. but the sooner that someone can build their own positive credit history the better. (and of cause the important caveat is that getting credit early in life is a bad move if it results in the child creating a negative credit history – which of course was what was often happening, resulting in the recent legistation.)</p>
<p>We moved back to the US after living abroad for almost 10 years. Our pre-expat credit history had gone away and not having a credit history did cause us some inconvenience. I have cosigned on a secured credit card for S so he can develop a credit history as well as having it for emergencies. </p>
<p>Another thing to talk to your kids about-- S is a first year student in a college in a different state from where we live. A few weeks into the fall quarter, he lost his wallet which contained all his cash, his atm card from a bank at home, his credit card, and drivers license. He had not yet gotten around to opening a local bank account near his school and so had no access to money at all (except some cash that I mailed him) for the couple of weeks it took to get everything replaced. Fortunately, he was living in the dorm on a meal plan, so we didn’t need to worry about him going hungry, but being completely broke was definitely an inconvenience. He learned to be more careful with his wallet (which did eventually turn up intact about a month later) and to only carry around things that he actually needs. He also has a local bank account now.</p>
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<p>For our D, she bought a car after one year on the job. Needed it to drive to work. She could get a loan at X%–but because she had a 5 year good credit history, she qualified for the lowest interest rate loan. </p>
<p>Plus we were able to move the cell phone out of our name and into her name. She couldn’t get a cell phone in her name because she didn’t have good credit right out of high school. Not that it was a big deal–but it is good to start to untangle finances and let them fly on their own.</p>
<p>D1 always used her debit card - no money, no purchase. She had quite a few friends with their own store credit cards and other major cards, instead of saving up money for things they wanted, they would charge it and pay over time. They would buy a new Mac, camera, phone, clothes on their credit card and tell their parents otherwise. Some of those kids have credit cards that their parents don’t know about. Those kids may have good credit (minimum payments at 23% interest), but they are graduating with large credit card bills on top of their student loans. I didn’t want D1 to get into that habit (why have credit before having a real job), so we insisted on her not having any credit card before graduation. As she is getting ready to into the real world, and she now has money saved from her summer internship, she will probably get her own credit card(s) this spring.</p>
<p>My younger s uses just one personal cr card. He had a second one but never activated it-- so it sits here. He has one joint card with me for books/travel, etc, but uses his personal card for his purchases. He has purposely kept his limit low so he isnt tempted to overuse it. If he gets to his limit within the month, he pays it off early, on line, so he can use it again. I guess it makes him responsible. I like it.</p>
<p>S1 used a BofA debit card from the time he opened his “checking” account 5 years ago without a problem. He just got a Bof A credit card this past semester (senior year college) on his own; think they gave hm a $500 credit limit, so he’s charging all his gas purchases to build credit.</p>
<p>About a year ago he left our family cell plan because AT&T had less than stellar service at his school and off-campus housing. Sprint had no problem signing him for an extensive data plan and a $350+ phone; credit never raised as an issue. Maybe because he has had utilities in his name for a couple of years?</p>
<p>Our kids have their credit cards on auto-pay from their accounts. We made it very clear that they should never even consider not paying them off in full every month. (And they are smart enough to be able to calculate how much it would cost them if they did…)</p>
<p>I’m still undecided on the issue of students developing credit history. Until my kids are earning their own money (ah, hopefully this summer), not sure if I’m willing to do the farce of getting a card in their name and paying the bills for them. </p>
<p>I do appreciate reading all of the various hints and insights.</p>
<p>If a kid is responsible, I don’t see the problem in getting them a credit card at 18. It’s just one more baby step on their way to independence, sort of like going driving with them when they have their learner’s permit. I’d rather have them make mistakes now, under my watch, when the amounts at stake are relatively small.</p>
<p>nngmm, thanks for the info. We just went to BofA on Christmas Eve to open a student account for 14 y/o S. They offered some kind of ebanking account aimed at students, no fees if all done online. He forgot to bring ID and ss#, so maybe this week. I really just want a reloadable card without fees for him.</p>
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I own some rental properties. We do credit checks and employment/income verification on everyone we rent to.</p>
<p>If someone have no credit history, we would be very unlikely to rent to them without a cosigner, particularly if they have no real (post-graduation) employment history. A “letter of employment” means nothing unless it is sent directly from the employer - anybody can write their own and put whatever they like on it, why would I trust that? And having the ability to pay is not necessarily related to “will pay on time and in full every month”.</p>
<p>Having some established credit history would be a big advantage. It could make the difference between needing a cosigner or not.</p>
<p>"Having some established credit history would be a big advantage. It could make the difference between needing a cosigner or not. " - Good point. Would a year or two of credit history be enough? </p>
<p>Our current scheme with debit card works very well, so I’d like to delay credit card a few years. At that point DS would have co-op earnings and his own expenses to budget.</p>
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It might - it would depend on what it was. What we are looking for is evidence that you meet your obligations. A loan with a perfect payment history is the best, a recurring bill (like a cell phone bill) is good, a major credit card with a decent credit limit (4 figures) that shows a perfect payment history is decent. A gas credit card usually has a pretty low limit so this would not be so good. We also look at your numerical rating, too. If that is high enough, we look less closely at the actual items on the credit report - you can’t get 700+ credit without doing everything right.</p>
<p>Every landlord has their own criteria and methods they use to evaluate a potential tenant, though - some may be less conservative, some may be more.</p>
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<p>A good credit goes a long way from buying that first car to rent an apartment, even some jobs might require checking up credit history.</p>
<p>I know the hassels of not having any credit history. When I first came to USA, I had to pay mark up cost on every thing from my first car to apartment security deposits. </p>
<p>Yes, you can co-sign for everything but doesn’t it make more sense to have a good credit rating to begin with so that children learn how to responsibly use the credit card during college.</p>