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re: 18 year old son wants to start building credit. Recommendations?
Posted on 2/7/13 at 3:01 am to htownjeep
Posted on 2/7/13 at 3:01 am to htownjeep
This is how we did it.
We let our daughter take out a small loan using our savings account as collateral. We made her take the loan money and stick it in her savings account and each month for 6 months made her transfer the payment out of her savings account to make the payment. We did this twice and the second time we increased the loan and repeated the process.
Also we bought her a new car at 18 and put her on as a cosigner and got her 2 credit cards (Capital one and Discover with a 500 limit). Since she only used them for gas and a few other small items, she paid them in full every paycheck (usually the balance was only 50+ dollars so it was easy for her to do. She would prefer to pay with cash but understands the importance of being able to be responsible with credit.
After a year she decided to trade her car in and get a new one. She was able to get it in her own name because she had established credit and a credit score over 700.
BTW she is only 20 and will gradute college next year. All of this has paid off for her and it showed her how to be responsible. She is getting married at the end of the year and she and her finance just got approved to start building their first home.
We let our daughter take out a small loan using our savings account as collateral. We made her take the loan money and stick it in her savings account and each month for 6 months made her transfer the payment out of her savings account to make the payment. We did this twice and the second time we increased the loan and repeated the process.
Also we bought her a new car at 18 and put her on as a cosigner and got her 2 credit cards (Capital one and Discover with a 500 limit). Since she only used them for gas and a few other small items, she paid them in full every paycheck (usually the balance was only 50+ dollars so it was easy for her to do. She would prefer to pay with cash but understands the importance of being able to be responsible with credit.
After a year she decided to trade her car in and get a new one. She was able to get it in her own name because she had established credit and a credit score over 700.
BTW she is only 20 and will gradute college next year. All of this has paid off for her and it showed her how to be responsible. She is getting married at the end of the year and she and her finance just got approved to start building their first home.
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Posted on 2/7/13 at 8:10 am to tiger91
quote:
My son is a user of our card ... THAT helps him to build credit? I honestly don't think I knew that since the bill comes to us and is paid by us. (He uses it for gas, things for school.)
It does, get a copy of his credit report and it should be on there.
quote:
And I thought if under 21 yo you had to have a parent co-sign???
nah, I had 3 cards with about 10k in debt by the time I was 21
Posted on 2/7/13 at 8:21 am to yellowfin
me too. "Hey get a free LSU shirt and we'll give you $5k limit credit card".
Ok. Ill take two please.
Posted on 2/7/13 at 9:02 am to bryso
quote:
Add him as an authorized user on your cards and don't actually give him the card.
Think this is what I'll end up doing immediately. I'll look at some of the other ideas (ie co-signing loan etc) later.
quote:
That is unless ur a broke dick
Yep, that's me
Posted on 2/7/13 at 9:44 am to htownjeep
I didn't know what I was doing when I was younger, but somehow ended up with a 789 credit score when I bought my house.
I had a card with my parents for gas and emergencies from the time I could drive . Used it for books and things while in college. I also took out a few small student loans. That's really it.
I've since made some mistakes like closing cards and opening too many things in a short period of time. If he stays away from that, he could be in good shape by the time he's graduating.
I had a card with my parents for gas and emergencies from the time I could drive . Used it for books and things while in college. I also took out a few small student loans. That's really it.
I've since made some mistakes like closing cards and opening too many things in a short period of time. If he stays away from that, he could be in good shape by the time he's graduating.
Posted on 2/7/13 at 1:38 pm to htownjeep
Agree with the posters who recommend a bank account and a credit card, keep it low limit, like $500 and have him put particular charges on it, say only gas paying it off each month. The fact that he wants to build credit is a great sign, encourage him to be as involved in his finances as possible, just keep an eye on him in case he does something rash... not unheard of for an 18 year old.
Posted on 2/7/13 at 4:29 pm to southernelite
southerelite, I thought the cosigning thing happened when there Obama went after credit card companies due to those who were all overextended.
I want to say it was talked about here .. that was quite a long time ago though.
I want to say it was talked about here .. that was quite a long time ago though.
Posted on 2/8/13 at 7:38 am to tiger91
Co-signing a loan, cc is a really really bad idea. If he can't get the credit himself, he shouldn't have it. I understand he may not have credit due to his age, but it is giving him the wrong impression for future situations. I'm going to get reamed here, but I'm a Dave Ramsey listener and I will not be trying to build my kids credit by putting them in debt. Teach them that debt is not needed and for them to save their money and pay with cash. I know all the ballers here pay off their 30k in charges every month, but its my opinion that debt and "rewards" 99% of the time are not worth it. Teach them to be responsible by not buying things that they cannot afford.
Yes I know most parents have good intentions by helping their kids build credit, b
ut it usually turns out bad when the kids get older. Just my .02¢
Yes I know most parents have good intentions by helping their kids build credit, b
ut it usually turns out bad when the kids get older. Just my .02¢
Posted on 2/8/13 at 7:59 am to BoobYo
He's one of the most mature 18 yr olds I've ever seen. I wish I would have been half as responsible at that age. We've had many discussions regarding credit. I believe it is very important for him to start early as long as it's done responsibly.
And, if anyone cares, I went the route of just adding him to a couple of credit cards as an authorized user (he will not have any cards immediately) and signed him up on a monitoring site (myfico.com) and he's excited to watch his score grow.
And to boobyo, I have taught him how to only buy things he can afford. I've also taught him how much money he will save over his entire life by having a high credit score and getting low interest rates on mortgages, car loans and such.
And, if anyone cares, I went the route of just adding him to a couple of credit cards as an authorized user (he will not have any cards immediately) and signed him up on a monitoring site (myfico.com) and he's excited to watch his score grow.
And to boobyo, I have taught him how to only buy things he can afford. I've also taught him how much money he will save over his entire life by having a high credit score and getting low interest rates on mortgages, car loans and such.
Posted on 2/8/13 at 8:43 am to tiger91
my parents bought a vehicle once and added me as the co signer. also maybe get a cell phone under his name, i believe that was my first item under my name.
Posted on 2/8/13 at 8:54 am to lsuCJ5
quote:
also maybe get a cell phone under his name, i believe that was my first item under my name.
Do those get reported to credit agencies? He has a phone on my plan and pays me for it already.
Posted on 2/8/13 at 12:35 pm to htownjeep
Although such a thing as "responsible 18 yr old" is up for debate because they have relatively nothing to be responsible for, if he is responsible as you say he is, then show him how much more money and potential headaches he could save by not needing a loan for cars and other things. Why make it OK to him to be in debt?
Posted on 2/8/13 at 12:45 pm to htownjeep
Finishing college with no debt would be a better thing to focus on at 18.
Posted on 2/8/13 at 1:03 pm to BoobYo
You do understand that debt can be used to save money, right? I have plenty enough money to pay off both of my car loans, but when the interest rate is 2%, I have no reason to. My investments are making at least 4% each year since I've had them. If he learns from a young age to use his debt properly, he will benefit in the long run. But he needs to build his credit score to do just that.
This post was edited on 2/8/13 at 1:04 pm
Posted on 2/8/13 at 1:41 pm to BoobYo
quote:They are not saying to co sign on soomething he will pay for. THey are saying, if you're going to be buying a car for your son to drive, let him co-sign with you.
Co-signing a loan, cc is a really really bad idea. If he can't get the credit himself, he shouldn't have it.
Posted on 2/8/13 at 1:55 pm to htownjeep
As it looks like others have said, Capital One has a great credit card aimed at people with no credit. Just get him started on that making small purchases and make sure he pays it off every month.
Posted on 2/8/13 at 2:03 pm to KG6
quote:
You do understand that debt can be used to save money, right?
Probably one of the most financially incorrect statements I've seen in a while. How can you save money by paying 2% interest, versus paying none by using cash? Then you could use the money you would have been paying the payments towards those investments. I just refuse to subscribe to the idea that "points" and "rewards" are worth going into debt. Wealthy people do not become that way using points and rewards. Granted a small percentage can use them for a small advantage, but all in all they are just a trap. The only reason I would teach my children to go into debt would be for a house, along with a size able down payment. Not everyone agrees and that's fine.
Posted on 2/8/13 at 2:24 pm to BoobYo
quote:
Probably one of the most financially incorrect statements I've seen in a while. How can you save money by paying 2% interest, versus paying none by using cash
If I used all of the money I had in investments, I wouldn't be using it to make the 4%! It would no longer exist! Your saying that I could use the money I save to invest, but 4% of the 20 dollars a month I spen in interest, really isn't that much. 4% of 40k in investments, is a lot better sounding to me.
I guess technically when you step back and look at my situation, I'm not in "debt" as I can pay it off, but I am using credit wisely. I am willing to pay interest to keep my money, because I know that I can make more than the 2% that I am paying. Hell, my checking acount makes 2% interest.
This post was edited on 2/8/13 at 2:33 pm
Posted on 2/8/13 at 2:24 pm to BoobYo
I absolutely loathe these threads and people that speak in absolutes that really shouldn't.
I tell myself not to click...and shite. I'm here.
I tell myself not to click...and shite. I'm here.
Posted on 2/8/13 at 3:22 pm to KG6
Not saying take all your investment money out to buy the car. Wait, save up and pay cash.That 20 bucks a month you would save for 60 months would be put into your investments, along with the "payment" each month you would have been spending on the car. What good is it to make 4% on 40k when your losing 2% on 20k?
Btw, I would see if I could do better than 4%. The market is too good right now to be making such a low return.
Btw, I would see if I could do better than 4%. The market is too good right now to be making such a low return.
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