**UPDATED** Helping a young adult with no credit to get credit

[Lady Florida.]

*****Update in this post.*****

https://forums.welltrainedmind.com/topic/703032-helping-a-young-adult-with-no-credit-to-get-credit/?do=findComment&comment=8833818

Ds has no credit. Back before the pandemic he wanted to buy a new computer and hoped to get credit with Best Buy where he bought it. It was around $900 and he was turned down because his income wasn't high enough and he had no credit history. We paid for it and he paid us back. Now he's looking at moving out - not yet but after the pandemic - but will need a credit score to be approved to rent somewhere,as well as to get utilities. 

We don't want to encourage him to apply for a credit card. His ADHD, even on meds, would probably have him buy things with the card on impulse. Plus I'm convinced his love language is gift giving and he'd buy things on credit for his girlfriend or pay for everyone's dinner with his card. 

Any ideas of what to suggest for him to try? It's that circle of you can't get credit because you don't have credit and you don't have credit because you can't get credit.

 

Edited November 19, 2020 by Lady Florida.

[Corraleno]

Can you add him to some of your credit cards, and then just put the cards in a drawer? I added each of my kids to my Amex card as soon as they turned 16, and it does help build credit. (They both have the cards, but they know they are just for emergency.)  He could also get a secured card with a fairly low limit, so he can't get into debt. 

As far as renting, are you willing to cosign? I cosigned both DS's and DD's leases, so there was no issue with renting. After a year they can take me off the lease.

 

[Katy]

You can co-sign for a car.  Or loan or gift him enough money (30-50%?) towards a car so he can get a loan in his name.

You can get him a card but keep it yourself except for one bill that's automatically charged and paid for each month.

[Lady Florida.]

2 minutes ago, Corraleno said:

Can you add him to some of your credit cards, and then just put the cards in a drawer? I added each of my kids to my Amex card as soon as they turned 16, and it does help build credit. (They both have the cards, but they know they are just for emergency.)  He could also get a secured card with a fairly low limit, so he can't get into debt. 

As far as renting, are you willing to cosign? I cosigned both DS's and DD's leases, so there was no issue with renting. After a year they can take me off the lease.

 

We don't have credit cards and haven't had any since the mid-2000s. Well, we kept one for emergencies but we don't even know where it is as we've never used it. In spite of that we both have excellent credit scores from things such as our mortgage and the occasional item we bought on a store's credit.

We could co-sign. That would at least get him into a place. He's still going to need a credit score of some kind down the line. 

[Arcadia]

We didn’t have any credit when we relocated to the states. My husband’s employer’s HR wrote a letter for us verifying that my husband would have no issue paying rent for at least a year.  The leasing office accepts HR letters in lieu of credit history since many renters are H1B visa holders.

I started with a secured credit with a limit of $200 many years ago just to establish credit history. Mine is with Citibank and doesn’t have an annual fee but I am a CitiGold customer.

I have a Costco credit card with a high credit limit based on family income. I would not recommend that for someone who is not used to handling high credit limits.

[Lady Florida.]

Just now, Katy said:

You can co-sign for a car.  Or loan or gift him enough money (30-50%?) towards a car so he can get a loan in his name.

You can get him a card but keep it yourself except for one bill that's automatically charged and paid for each month.

He's actually saving up for a car so that's a good idea. Obviously he needs a car before he moves out. He currently uses our older vehicle which has become his without really being his.

 

[Lady Florida.]

Just now, Æthelthryth the Stormy said:

+1- I was thinking secured credit card through a credit union with a small limit. 

We all use the same credit union so that's a possibility.

[cjzimmer1]

I co signed a credit card for my DS but since he didn't have a job I requested a very low limit.  His limit is $200 a month.  DS pays it off in full twice a month so he doesn't forget and end up paying interest, However, I'm also on his bank account so I can see and authorize transactions.  So if he forgets to make the payment, I can do it on his behalf. These are all separate from my accounts.  Obviously it doesn't prevent him from charging to the max each time but it's small enough that he can't go too crazy.  Perhaps you could start him with a $50 or $100 month limit just so he has practice without so muych at stake.

[Katy]

Oh I forgot, before our first mortgage our credit union had this "credit builder" loan.  It's a secured loan of $1,000-2,000, but the entire amount was in a savings account.  The credit union paid on the loan each month out of the "secured" savings account.  So it literally did nothing except raise our credit scores a few hundred points.  We had used the Dave Ramsey system and stupidly had only one credit card we rarely used, and no car loans before we tried to buy a house.  We'd planned on not buying until we could pay cash but after the second rental nightmare we were done and needed to buy.  If your family uses one bank or credit union, call and ask them about credit builder products.  They'll probably even be able to tell you what percentage of a down payment you'll need to give to get a car loan with no credit.

[teachermom2834]

We cosigned on a car loan (would only do this if kid was very responsible and if I was ready to absorb the payments if needed). It's not for everyone but it was good for us. He got a better rate than he could have on his own, too.

We put ours as authorized users on our main credit card and that helps.

Can he get a card somewhere he won't overspend? A gas station? Of course he still could go in and buy food and junk on impulse but it isn't as tempting as a VISA. They also usually have a low limit so how much trouble he could get himself in is minimized.

I know there are secured cards where you put some money down (like in escrow I guess) and that is to guarantee the card. These are easier to get and one way to start. 

[BlsdMama]

are you sure he needs it? DS (now 21) and DD (18 - moving out in December) neither needed positive credit, just deposit and last month’s rent in addition to first month. 
 

DS maintained a healthy checking account at a local credit union, saved a significant down payment, and the CU granted him a car loan ($4k) with no co-signer. He is making double payments so he can sell it and get a car he’d rather have. He did have to prove income. 
 

Getting a new line of credit isn’t terribly helpful. Some of the factors of credit is how old your credit lines are, your payment history, and new credit requests are actually a negative. If you wanted to give him positive credit the only way to do so quickly is to add him to an established credit card of yours with a long and positive history and a low percentage of the line reporting. 

[Lady Florida.]

48 minutes ago, teachermom2834 said:

 

 

 

Can he get a card somewhere he won't overspend? A gas station? Of course he still could go in and buy food and junk on impulse but it isn't as tempting as a VISA. They also usually have a low limit so how much trouble he could get himself in is minimized.

 

Thanks. That's something to look into.

45 minutes ago, happysmileylady said:

I am going to suggest that you do not presume he can't rent some place without a credit score.

 

 

 

29 minutes ago, BlsdMama said:

are you sure he needs it? DS (now 21) and DD (18 - moving out in December) neither needed positive credit, just deposit and last month’s rent in addition to first month. 
 

 

In our area getting approved to rent often as hard as, or harder than getting a mortgage. Even if the homeowner isn't using a third party to manage the property, and many do, they put you through all kinds of credit reporting hoops. The only way to get around it is to know someone who has a house to rent or through a friend of a friend kind of thing. Unfortunately we don't have anyone like that in our circle at this time.

 

[Lady Florida.]

Thank you all for the suggestions so far. They're helping me brainstorm. Keep them coming! 

This isn't something that's going to happen soon but he and I were talking about it yesterday; about him wanting to get a place with some friends, and how he can get credit. I started trying to come up with ideas then thought to ask the Hive. 

[Pen]

Contact utilities company — it may be possible to get utilities without credit and that may the help establish credit etc.

A cellphone plan might possibly help. 

Apartment may be possible with you to co-sign him, or as a temporary sublet that starts to establish him

 

some additions of a child to parent credit card do and some don’t help build credit for the child. You can ask your credit card company. If it would help you can add him

officially but not give him actual access so as to potentially misuse it. 

 

Possibly actually working with him on real money management so that he could someday have a credit card and not misuse it would also be a good idea—and it sounds like some of that happened with the computer that he paid you back for.  Finding more ways to work on that would probably be good. 

 

 

[BusyMom5]

The exact name escapes me, but there is a credit card just for this purpose.  First you pre-pay like a down payment-, say $500.  At the end of the month you pay the amount you spent in full  (to keep the balance at $500).  Its a total rip off- they hold your money then charge you interest snd fees if you are late on whatever you charged (not to exceed the amount you sent them)!  That said,  it is a good starter card if you have a kid who is looking to get a CC and doesn't have a steady income yet.  The bank suggested getting one and just using it for gas all month, then paying it off.   

[kbutton]

9 minutes ago, Pen said:

Contact utilities company — it may be possible to get utilities without credit and that may the help establish credit etc.

A cellphone plan might possibly help. 

I've always been told that utility bills build credit too. I would maybe find out if you can get a bill in his name that will be reported to a credit agency. 

[Pen]

2 minutes ago, kbutton said:

I've always been told that utility bills build credit too. I would maybe find out if you can get a bill in his name that will be reported to a credit agency. 

 

That’s a good point. Maybe he could have electric or something in his name while still at parental house and pay the bill monthly (even if parents provide the money it sounds like bill paying practice would be good).  And maybe that could build credit before moving out on his own. 

 

[Pen]

22 minutes ago, BusyMom5 said:

The exact name escapes me, but there is a credit card just for this purpose.  First you pre-pay like a down payment-, say $500.  At the end of the month you pay the amount you spent in full  (to keep the balance at $500).  Its a total rip off- they hold your money then charge you interest snd fees if you are late on whatever you charged (not to exceed the amount you sent them)!  That said,  it is a good starter card if you have a kid who is looking to get a CC and doesn't have a steady income yet.  The bank suggested getting one and just using it for gas all month, then paying it off.   

 

“Secured” is probably term you mean. But it may not be a good idea for a young person with ADHD and wanting to give gifts to a girlfriend. 

[GoodGrief]

4 hours ago, Lady Florida. said:

We all use the same credit union so that's a possibility.

We figured out this summer that my new college grad has no credit history when she tried to get a credit card in her own name after several years of being an authorized user on ours. It's apparently much more difficult to get a credit card for a new grad now than it was back when I was in college because she was turned down for a few. She also learned that each application resulted in another ding to her credit.

I think I'm going to make sure our youngest gets a small student loan that we start paying on right away.

[EKS]

Back in the day when I was in this situation, I got a secured credit card with a $500 limit.  I know you said no credit cards, but perhaps if the limit is low, it wouldn't be as bad?  

[frogger]

I was shocked to discover my 20 year old had a score of 780 last time he applied for a Discover student card.

I think the biggest thing was having his own cell phone plan which he paid monthly and was never late but he had it since he was 17 I think. So 3 years of always paying on time. We had too many phones for the family plan so we booted him. 😂 It worked out in his favor I think.

The only other thing he ever had was a secured card. He had it for three years though. We got it when he was 17 because he was going to the Czech Republic and needed a way to access money without a bunch of fees. Also, we use credit cards because I believe they are safer than debit cards. Just saying that in case it was a big player in his score.

 

But in your case I would stick with something like a cell phone that he pays regularly or even put it on autopay. Or you can move a utility into his name. 

If you get a credit card you can also get rid of the actual physical  card  or store it away for him and maybe have a utility auto paid from it and then if he pays it monthly it will help.

Edited October 1, 2020 by frogger
Looked up credit score

[mumto2]

We started with secured credit card for each kid.  We kept control of the card which they happily agreed to as the credit score was the goal.  Basically we charged a tank of gas and paid the card until they qualified for a better card.  Did the same with an unsecured with a low limit.  They both have good scores now.......and both have cards with higher limits stored with us.   They still just run around with their campus prepaid card for snacks etc on campus and a low limit one for other purchases off their bank account.

[Scarlett]

2 years ago ds20 got a secured credit card.  But when dss19 tired this year to do that both banks we use no longer offered that option.  So I co-signed for dss19.

I wonder if all banks are getting away from that?

 

[Pen]

1 hour ago, Scarlett said:

2 years ago ds20 got a secured credit card.  But when dss19 tired this year to do that both banks we use no longer offered that option.  So I co-signed for dss19.

I wonder if all banks are getting away from that?

 

 

If USAA is one it is supposed to get a new secured card, but I think it isn’t high priority compared to other things they have had to deal with like Covid.

we found a list of several banks that had secured cards when we checked a few months ago just using Google. 

 

 

[Lady Florida.]

16 hours ago, GoodGrief1 said:

We figured out this summer that my new college grad has no credit history when she tried to get a credit card in her own name after several years of being an authorized user on ours. It's apparently much more difficult to get a credit card for a new grad now than it was back when I was in college because she was turned down for a few. She also learned that each application resulted in another ding to her credit.

I think I'm going to make sure our youngest gets a small student loan that we start paying on right away.

 

7 hours ago, frogger said:

 

I think the biggest thing was having his own cell phone plan which he paid monthly and was never late but he had it since he was 17 I think. So 3 years of always paying on time. We had too many phones for the family plan so we booted him. 😂 It worked out in his favor I think.

 

 

But in your case I would stick with something like a cell phone that he pays regularly or even put it on autopay. Or you can move a utility into his name. 

 

He pays for his phone but is on our plan. It's cheaper for all of us that way, having a family plan.

2 hours ago, Æthelthryth the Stormy said:

I think you will be glad you've done this later, and not just for renting. An awful lot of employers, particularly in certain industries,  run credit checks now on prospective employees, so having good credit will potentially help there too. Someone starting out with no credit could lose out to the algorithm against an otherwise equal candidate with a high credit score. The whole automated HR thing brings in so many more factors now and hoops for people to get through. 

Yes, more and more your credit score is used for things other than credit. I don't think it's good but that's how it is.

[Tanaqui]

1. Put his name on one or more of YOUR utility bills - or phone bill, or cable bill, whatever.

2. Get him a credit card, pay the bills with the credit card.

3. Set up his account to autopay the credit card bill every month. Make sure you give him the cash to cover your share of the bills.

[katilac]

23 hours ago, Lady Florida. said:

Yes, more and more your credit score is used for things other than credit. I don't think it's good but that's how it is.

This may be somewhat more common but it's definitely not at all new. I know for sure that some big companies were doing it 25+ years ago. 

[Lady Florida.]

Just thought I'd update since so many of you gave helpful suggestions.

We budgeted an amount from the sale of our old house to buy a good used car. The plan was that we'd pay it outright then have ds pay us back. Instead we decided to cosign for him. Now, he isn't currently working so we'll be making the payments but that's really no change because we were going to buy the car at first anyway. He had put a large amount from his stimulus money and unemployment money aside specifically for a car so he used that for the down payment. Once he gets a job (and he's trying, every day) he'll take over both the payments and the insurance. 

 

Edited November 19, 2020 by Lady Florida.

[hippiemamato3]

I thought I had posted in this thread, but maybe I didn't. At any rate, we tried the "add your young adult to a credit card" with our son when he turned 16. He just turned 18 and has a credit score in the high 700s just from being an authorized user on one of my CCs. Just an idea in case anyone else wants to do the same. 

[GoodGrief3]

1 hour ago, hippiemamato3 said:

I thought I had posted in this thread, but maybe I didn't. At any rate, we tried the "add your young adult to a credit card" with our son when he turned 16. He just turned 18 and has a credit score in the high 700s just from being an authorized user on one of my CCs. Just an idea in case anyone else wants to do the same. 

I do think you have to choose the credit card carefully. We found that having our daughter on our Bank of America card did not impact her credit rating positively. Something about them not reporting authorized users to the credit bureau (I may have the specifics wrong, but I was given an explanation like that by someone with the credit card company.) We now have her on our USAA card that is supposed to impact her score positively. At this point though, we have also cosigned a car loan for her.

It's interesting that my younger daughter has had so much more credit rating trouble than her sister. She actually has money in the bank, graduated without loans, and has a job with a significant starting salary that she has held for a few months now (and had been an authorized user on our credit card). Her sister had student loans, works a smattering of part time jobs, and was never an authorized user on our card.  I do think we will make sure our youngest has a small student loan when the time comes.

[popmom]

On 9/30/2020 at 6:55 PM, Lady Florida. said:

We don't have credit cards and haven't had any since the mid-2000s. Well, we kept one for emergencies but we don't even know where it is as we've never used it. In spite of that we both have excellent credit scores from things such as our mortgage and the occasional item we bought on a store's credit.

We could co-sign. That would at least get him into a place. He's still going to need a credit score of some kind down the line. 

Just being on a lease and paying on time will establish credit.

FYI, I went through this recently with a dd. She had no credit after graduating from college. She was able to get an apartment with a letter from her new employer verifying her income. We had to pay a slightly higher deposit, too. I asked about me cosigning on the lease. If there is one person on the lease, they apartment required that your salary be 3 times the rent. If I had cosigned, they would have required proof that she and I together earned 6 times the rent. 

 

Edited November 20, 2020 by popmom