One needs a credit score for many, many things - rentals, loans, phone plans, utility hookups, etc… I think it’s vital to be working on a good credit score, even at college age.
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D has a Roth, checking, savings and brokerage account. Her dad contributes to the Roth matching her income. I make auto contributions to savings and brokerage accounts (100 bucks into each) since she was small. She has a debit card that she loves as she is only allowed to spend 2/3 of her bring home pay, so she keeps on working because she loves having money to spend and not ask for permission. She has been an auth user on the only credit card I own (paid in full monthly) since she was 3. She will get a secured credit card when she turns 18 from our bank which does report to all 3 agencies. The plan is to use it for gas and pay in full each month. Credit is important for us. Because when she needs to replace her car, she will need to finance it (I only provide the first car), rent apartments and the such. yes, even cell phone companies check credit. I live frugally and D has learned my frugal habits.
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But even if learning your frugal habits, most importantly, she has also learned fiscal responsibility!!
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Sorry, but I have to ask—is it a typo that she has been an authorized user on a credit acct since she was 3? You are nothing but thorough on this front!
@annegp When we co-authorized the kids, S21 was 14 and D24 was 11ish, so I would think it doesn’t matter the age of the minor.
S18 rented an off-campus apt with friends for next year and landlord ran a credit check. He and his friends ended up not needing any parents to sign on to guarantee the lease. Some landlords will check.
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No guarantee there, of course. My D looked into an off campus rental, and even with a score in the high 700s she was asked for a co-signer since she couldn’t prove the income threshold for the apartment independently (with paid work, scholarship monies didn’t count). They absolutely ran a check on both us and her though. We’ve rented 16 places to live in our relationship and our credit was important for every single one.
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Oh good plan on credit card! D has her own checking account with a debit card since she was 16 but I do want her to have a credit card to build up a good score. H and I had our credit run mulitple times in our early yrs—the score was key for rate and qualifying for the first house as well as run by landlords and when I bought my car after college.
As far as working—she has had a good summer job for years and this summer it has a nice promotion and increased$ so she should earn $2000 or so. She has already applied and made it past the first round for a campus job, but Work Study kids get first priority so she likely won’t get it. As former WS kids, H and I agree with that policy! It is only a 3hr a week job, just something to get her started—her idea, we didnt know she applied.
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My kid’s experience renting in NYC was that the minimum score required was at least 730. His group of guys renting together had some turnover because some didn’t have the minimum credit score to pass the credit check. And this was not for a luxury building!
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Sometimes that has to do with age. Or if they don’t have the income. I had to cosign my daughter’s dorm lease (it was a private dorm) because she was 17 when she signed it. For her apartment next year I think I had to cosign it because she’s under 21. For my other daughter in NY I did not have to cosign her lease, but we made sure an attorney looked at both of them because college town landlords are the worst and many try to screw students when they move out at the end.
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Discover card for students is the best. Also if they go abroad no international fees. Not all places may take it but for that like in my case since my daughter is going to Israel I’m also having her take one of my cards that she’s authorized on that has no foreign transaction fee.
But generally the Discover student card is nice. They also get a bonus for good grades and in the first year they match the bonus. For some reason Discover sent one of my kids the regular Discover card. But when I asked which one my son should get they both (since they’re twins) think he should get the regular one. I am more inclined to just have him get the student one. I think it was a fluke the one qualified for that. Somehow she also qualified for a Delta Amex card. It works out since she gets free baggage check for flying and that more than pays the annual fee - first year was free.
But in general it’s better to have the credit card than debit for things like food. But when buying things like clothes, shoes, or other tangible items, much better to have a credit card. My daughter had an issue with expensive shoes she bought and if she had bought them through a debit card the money would’ve been gone as she would’ve had a heck of a time disputing the charge. With Discover she was able to dispute it and the money never left her account. With my son, he bought something for this business he has, turns out it was as scam website. He used his debit card. Fortunately he realized it immediately and called Chase to stop it, but had he not realized it, the $ would’ve been gone and they never would’ve been able to get it back. Only because the transaction was still pending was he able to stop it.
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Thanks. All good info. If it’s as simple as naming our kids as authorized users on our credit card and they don’t even have to use it, then it seems like a no brainer. My H seems to think it’s pretty easy to “have good credit” and this is unnecessary. Like, if S19 has a completely clean slate - never had a bill to pay and so was never late on a payment and he had a nice salary - no one would turn him down to rent a place or even buy a car. He would likely not finance a car anyway and just buy a used one he could pay for in full when that time comes so the only thing we can even think of as a problem would maybe be an apartment.
My H has never had a car payment or a credit card that wasn’t paid off in full each month and rented plenty of places while young and never had a problem so I guess we didn’t think you needed to have a plan in place to get a high credit score. On the other hard, I did finance a car when younger and had some years where I didn’t pay off my credit card each month and also never had a problem getting an apartment. Maybe things are different now.
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My 23 year old doesn’t have a credit card. He has never had problem getting the credit he needs for an apartment or his business or whatever. He did finally get a credit card for his business without issue but he just doesn’t want a credit card. He considers that as “debt” and doesn’t want to be in that position and just wants to pay for stuff right away. I can’t convince him of the benefits of a credit card. He is not going to charge too much that he can’t pay but maybe he just doesn’t want to see it in a bill each month because I think he orders doordash essentially every day and doesn’t cook (not a good habit). But not having the credit card hasn’t hurt him, but I do think he should have him. I had gotten him a Discover card years ago but he never activated it and ultimately it expired and he never used it.
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she has been an authorized user, since age 3 y/o. sorry for the confusion.
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This varies by card company…AFAIK, broad brush strokes, if the kid gets an authorized user card that has a different number it builds credit for them, if it’s just the same number as the parents’ card then it doesn’t. That’s what AMEX told me, so when I added D19 to my account, she received her own card with a different number, but she is technically on my account. Maybe others have other experiences to share with this too.
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Ha. Well, that proves my H’s point. I think people have it in their heads that they need to build credit but I’m not sure that it’s crucial. If there’s no downside, though, I’ll look into the authorized user option and make sure he (and D) have separate numbers on their cards.
Here’s a US News article that argues having at least some positive credit history is better than no credit history.
“Having no credit score is the equivalent of having a poor credit score because you can’t prove to the lender you have a history of repaying your debts…”
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I will add, once we realized that my NYC kid could have lost his apartment without a good enough credit score, he now gets alerts when his score changes. Turns out, when you are young without a long history of working, and your balance rises and falls on the Discover card but is always paid off each month – your credit score fluctuates dramatically, from nearly 800 to below 720. So for families of soon-to-be college college seniors (and grads), I’d recommend keeping an eye on the score and taking steps to improve it.
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Asking for a friend…
If all three of his sons are authorized Amex users under his account, each with their own individual numbers, and their father makes ONE late payment, is their credit affected?
On my D’s amex authorized user card, her payment is completely different than mine…I can see all her transactions (it’s separated out by our two card numbers), and each card’s balance has a separate statement, and requires a separate payment (I just have autopay to our bank account setup). It seems like she really does have her own card/account, but because she is an authorized user on my account it’s still in my control. And, she would have never qualified for this card on her own.
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