How to build a teen’s credit history
Along the lines of our recent rant on college students and credit, the Wall Street Journal today is carrying an interesting article today. In it, Jonathan Clements states honestly that he ::GASP:: doesn’t want his college-aged daughter to have a credit card.
The dilemma is he also didn’t want her to have bad credit. And as we’ve discussed before, no credit is bad credit. I recommend this article because it offers tips on other ways to build up credit for college students.
No time? I, your ever helpful credit card blogger, will summarize the points here for your convenience:
Check the banks first: Even if your child has no credit record in “the real world, they may have a good record within one particular bank. Use that to your advantage by taking the typical bank offer of a low-limit, fair APR credit card, commonly referred to as a student offer or “student rewards”.
A secured card: Good for those with bad credit. Pony up $300 to $500 cash on the front end to help determine the card’s credit limit. Check for fair terms, reasonable fees and the ultimate goal - that the secured card converts to unsecured credit after a reasonable amount of time and no screw-ups. Remind your college student that their credit is already blemished (thus the need for a secured card), so a screw-up in this case includes charging the balance up past 30 percent of the credit limit. This will potentially hurt their credit record further, making that goal of unsecured credit seem even less attainable.
Co-sign for an auto: Many parents choose their child’s first or second year of college to seek a safe, reliable vehicle for transport to and from school. When parents allow their child to co-sign for the purchase, it builds credit — an added bonus.
Add them as a user: Adding your child as an authorized user on your own credit card account is their one-way fast-track ticket to established credit history. It’s the route Clements chose, and the route chosen by many other parents as well. In fact, it’s so common that there may be some changes on that front, Clements mentions in his article. But that’s another topic for another day.
