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Old 12-24-2018, 05:39 PM
 
Location: Boulder, CO
394 posts, read 131,105 times
Reputation: 764

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Hello folks.

My eldest of four just turned 18. How can I help them, as they hit this milestone, get started down the path of a good credit score ?

Only things I can come up with:

(1) Get them a credit card with a low limit ($1000 or so?) especially as they go off to college. Have it in their name with me as cosigner/guarantor. Will work best if they work part time/summers and pay for their own charges, I may step in for brake repairs etc.

(2) Co-sign an auto loan on an affordable car. I bought my daughter a car in cash this summer, but next time ...

My next-to-turn is only 16; they are spaced two years apart. Interested to hear what some of y'all might be able to suggest.

Last edited by ADogNamedSam; 12-24-2018 at 05:42 PM.. Reason: eliminated double line spacing (I hope)
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Old 12-24-2018, 05:51 PM
 
Location: The Triad (NC)
28,487 posts, read 62,101,894 times
Reputation: 32153
Quote:
Originally Posted by ADogNamedSam View Post
My eldest of four just turned 18.
How can I help... down the path of a good credit score ?
By paying their bills on time.
Yeah; they'll need some accounts in their names. Rent, utilities, CC's, cars.


Is he a big earner?
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Old 12-24-2018, 06:52 PM
 
Location: Pacific Northwest
316 posts, read 132,525 times
Reputation: 1448
So far sounds like a good plan.

I would always be careful about being a co-signer though. If your goal is to help your child step up and enter adulthood fully then they should be going about it 100% on their own. You can't control your child and they will mess up, it's important you give them the support but that doesn't mean putting your finances and credit at risk. Once your child is out on their own anything can happen in their lives that could make things messy. It's important that your there to help them up rather then get dragged down with them, keeping your credit clear and clean is part of that.

And trust me; everyone starts off with well meaning intentions but once your child leaves your home a huge part of their lives become outside of your control. My parents attempted this with a younger sibling and it got out of control very quickly; pretty soon there were fights over what she was spending money on, her boyfriend would use her card leading to trust issues, and finally the card ended up becoming soly my parents as my sister simply gave up on keeping up on payments (using the excuse of not being able to get a job because of school) leading my parents to pay off the cards on their own to prevent their own credit from falling. They also got burned by relatives with co-signing rentals (again, unauthorized people got involved and lead to eviction), car loans, and much more from people they thought they could trust but in the end life happens.

Maybe help them get a secured line of credit instead of a traditional credit card. It's pretty much the same thing except there's less risk for you and your child gets started 100% on their own with the proper limits in place to learn good credit usage. Same goes for the car, feel free to help out in the initial purchase or deposit but I would avoid being a co-signer. Building credit is pretty easy, once they get started on their own with finding jobs and paying for rentals. In fact they can explore ways were they can build credit by paying rent and utilities on time rather then using a credit card. It's up to what you feel comfortable with and they can realistically take on at the moment.
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Old 12-24-2018, 08:17 PM
 
Location: The Berk in Denver, CO USA
14,018 posts, read 20,330,583 times
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Teach your children to act as responsible adults.
We got our daughter her own credit card when she was 12.
She still has that card 21 years later.
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Old 12-24-2018, 09:04 PM
Status: "Re-edit status" (set 14 days ago)
 
Location: Was Midvalley Oregon; Now Eastside Seattle area
4,147 posts, read 1,886,778 times
Reputation: 3167
We started UGMA. Everything went to UGMA and came out of UGMA. I was just the custodian. I guaranteed nothing. He had his own bank account, credit card , brokerage account, student loans that he paid on month #1 and interest never capitilized to the next month. Any summer wages and later his working wageswent thru this account; And always showed a growth although sometimes very small. I

[All accounts held as minor was under a custodianship. He assumed control at age 22-23]
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Old 12-24-2018, 10:22 PM
 
Location: Kirkland, WA (Metro Seattle)
3,983 posts, read 3,252,328 times
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Quote:
Originally Posted by ADogNamedSam View Post
Only things I can come up with:

(1) Get them a credit card with a low limit ($1000 or so?) especially as they go off to college. Have it in their name with me as cosigner/guarantor. Will work best if they work part time/summers and pay for their own charges, I may step in for brake repairs etc.

(2) Co-sign an auto loan on an affordable car. I bought my daughter a car in cash this summer, but next time ...
Your 1) and 2) were exactly how my dad got me going, in 1985 when I entered college. Those being the old days, though, my limit was $300 . I was so conservative I hardly ever used it, if-ever. Just didn't come up back then, I was a cash-only enterprise all four years. Different times! Today, I'd have hesitantly but routinely run charges through often and paid off the balance each month, as cash is usually for the birds. My father had no time for pikers or deadbeats and would have gotten on me hard and fast had I carried any balance with his name on it too.

Actually, correction: my No. 2 did not occur: by the time I needed a substantial loan (in those days, $10k) I was professionally employed and handled it myself. It's till a great idea, though.
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Old 12-24-2018, 10:47 PM
 
8,822 posts, read 5,121,165 times
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I added my kiddos as authorized users on one of my credit accounts years before they turned 18. They started adult life with decent credit scores already established.
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Old 12-25-2018, 12:42 PM
 
Location: Florida
4,358 posts, read 3,692,049 times
Reputation: 4084
Being a college student will probably get them a card with no help from you. Just be sure they use it correctly and pay off every month.

For the 16 year old try and put them on your cards as a user. If you are lucky the cc will report the cards to the child's credit report as if they had the card. I would hold onto the card. If you send them shopping for something they need then set a dollar limit and have them use the card and then return it to you.

I would not borrow money just to build a score.

You could try getting a gas station cc. Let your 16 year old use it for gas and make him pay it off with his allowance and his checking account. Don't know if he can get a gas cc but these would be the easiest to get.
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Old 12-25-2018, 12:52 PM
 
797 posts, read 918,842 times
Reputation: 954
Point 1 and 2 may work for your kids but I see it as doing it for them instead of them learning how to manage their credit.

Instead I'd say to do as my parents did. Educate them on how a credit card works. The benefits. Explain how interest works, and why a good credit score is so important. Then let them open their own account in their name. Let them be responsible for paying it each month. By you being on the account you are sort of acting like a watch dog over the account and aren't allowing them to do it themselves.

This is just my humble opinion.
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Old 12-25-2018, 01:40 PM
Status: "Re-edit status" (set 14 days ago)
 
Location: Was Midvalley Oregon; Now Eastside Seattle area
4,147 posts, read 1,886,778 times
Reputation: 3167
Quote:
Originally Posted by leastprime View Post
We started UGMA. Everything went to UGMA and came out of UGMA. I was just the custodian. I guaranteed nothing. He had his own bank account, credit card , brokerage account, student loans that he paid on month #1 and interest never capitilized to the next month. Any summer wages and later his working wages went thru this account; And always showed a growth although sometimes very small.

[All accounts held as minor was under a custodianship. He assumed control at age 22-23]
It is very important that all accounts are identified under the child's TIN as the primary and owner. We filled 1040's every year since age 1, even though the only income was interest.

At graduation and at time of home purchase at 28, his FICO score was as close maximum conceivable. He's 33 now.
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