Minor children and building credit

[suesinfl]

Rock It posted on the cosigning thread and I started thinking. How old does a child have to be in order to start establishing credit? What type of credit and how to go about getting that credit? DD will be 15 in one month.

I have to run out until tomorrow, so if you have questions, you'll know that I'm not ignoring you.

[Opti]

I think unless the kid has a job trying to establish credit is kind of pointless. Personally I didn't try to do so until the year before college and I opened a store department card to do so.

[Deleted]

Most banks wont even let them have checking savings until they are 17... as for credit cards... no one is going to extend credit to an indivdiual who cannot be held to a contract... you can do some building by adding them to your cards, or at least you used to be able to ? ... but that has its own risks...

[lynnerself]

My kids got checking accounts at 16 I think. But the bank wouldn't give them a debit card until 18.
For credit they just got low limit student credit cards once the started college. They use them for small things and pay them off each month, But even at 23 and 25 they have yet to need major credit. Possibly only as a background check to rent apartments.

[mwcpa]

I beleive that a child cannot obtain a credit card until they are 21, and only when an adult co-signs for it (taking full responsibility for the payments of the debt).

In addition, in most states "minors" cannot legally enter into contracts. Therefore, noone in their right mind would extend credit to a child without someone else signing and being responsible for it.

[lynnerself]

Aug 18, 2012 13:45:09 GMT -5 mwcpa said:

I beleive that a child cannot obtain a credit card until they are 21, and only when an adult co-signs for it (taking full responsibility for the payments of the debt).

In addition, in most states "minors" cannot legally enter into contracts. Therefore, noone in their right mind would extend credit to a child without someone else signing and being responsible for it.

I didn't sign on my kids cards and they were not 21.
Just checking around the web it looks like 18 and a social secutity card.

[zibazinski]

You bet they try to get those college students to sign up. They now ban them from campus.

[Deleted]

18 is an adult for contracts, for most anything really.... 21 is mainly a drinking thing...

[justme]

There's a new law that went into effect. Something along the lines of anyone under 21 need a cosigner on the card or be able to prove sufficient income. Of course, like others said no one will give anyone under 18 a card for the reason others mentioned. My parents put me as an authorized user on their card to help build credit - they kept the card with my name on it in the safe and only gave it to me when I needed it. No chance of me running up their card that way.

[Sharon]

My DD is almost 19. She got her checking account when she was 16. The bank said that they like to have the kids have a checking account for a while then get a debit card a few months to a year later. She got her debit card before she left for college last year. She is an authorized user on my visa card. She also took out a Stafford Subsidized loan last year for school.

This summer she was in store approved for a store credit card, in her name only, at Maurices. It is what they call their student account. She showed her college id and was approved. I was astounded that she was actually approved. The clerk told us that she must have something positive in her credit history because of the limit on her credit card, apparently most of them are not that high. I am guessing that the student loan is having a positive affect but I don't really know.

I am not worried about her getting into trouble with the card because she almost cries every time she has to charge something. She doesn't like owing anyone.

ETA: She also calls me every time she charges something to my credit card at school, usually to ask if it is okay.

[Deleted]

If she is an authorized user on your account, that is probably showing up on hers as well... but i'd check to make sure that her credit report shows her activity... i mean, most people don't steal an identity and then keep a clean reacord, but its always a good idea to monitor credt reports... you can get one free annually from each of the big three...

[mwcpa]

Aug 18, 2012 13:49:56 GMT -5 lynnerself said:

Aug 18, 2012 13:45:09 GMT -5 mwcpa said:

I beleive that a child cannot obtain a credit card until they are 21, and only when an adult co-signs for it (taking full responsibility for the payments of the debt).

In addition, in most states "minors" cannot legally enter into contracts. Therefore, noone in their right mind would extend credit to a child without someone else signing and being responsible for it.

I didn't sign on my kids cards and they were not 21.
Just checking around the web it looks like 18 and a social secutity card.

Actually, the credit card act of 2009 says otherwise. This law signed into effect 5-22-09 states that credit card companies are baned from issuing cards to those under 21 unless they have a co-signer or can prove they have the ability to pay. Go to credit cards.com for more details.

[midjd]

If she is an authorized user on your account, that is probably showing up on hers as well...

I don't know if that "counts" as far as credit-building, though... I was an authorized user on one of my mom's CCs and still had zero credit after graduating college.

Then she maxed the card out before I had my name removed as an authorized user (but while I was building my own credit) and it didn't seem to have a negative impact, though it still shows up on my credit report.

[Deleted]

So, 18-21 year old need to prove they have the ability to pay before a credit card is issued... how is that different from anyone else??

I'm not sure exactly how authorized status works? Maybe is more joint ownership? I really don't know... i'd pull the kids credit report to see what was on there...

[Peace77]

In the past, CC companies would go to college campuses and hand out or mail out credit cards to students with no income. They would entice them to sign up with free T-shirts and other freebies.

It was free money until the bills arrived and nobody could pay the bills. Some kids had their credit trashed before they ever got a job.

[milee]

"Some kids had their credit trashed before they ever got a job. "

While I'm not a fan of the cc companies, IMHO, this really should be restated as "some kids trashed their own credit before they ever got a job." These are college students, they should be intelligent enough to read and make their own decisions or they shouldn't be in college.

Every time we enact legislation to protect people, there are consequences, some intended and some unintended. For example, this legislation to "protect" the poor, dumb college students does prevent some from making bad decisions, but also denies credit to others who would have been intelligent enough to use it properly. When I started college, I had really generous merit scholarship and a tiny loan, so that first year I didn't work. I also had 0 relationship with my parents, who wouldn't have loaned me $20, so could not fall back on them to help. So although my scholarship and loan didn't on paper provide for any extras, I lived very cheaply and had a little money to cover expenses. I was also able to get a student cc (think the limit was $300). With this new legislation, students like me with no parental support and no job but with the ability to manage my cash wouldn't have been able to get a cc.

[alabamagal]

Since I have kids currently in this age group, I can fill in some of the gaps:

Checking account debit cards - My bank will open at any age with an adult cosigner. First 2 kids got debit cards at 16, but my youngest got one at 15. I don't think there are any rules, it is just up to the adult cosigner as to when to give your kid a debit card that they can go and empty all the money out of it. My kids never had a huge amount of their money in high school, so not a big deal. And checking account is really an outdated term since my kids rarely use checks, just debit cards.

My oldest (now 21) turned 18 and went to college before the Card Act. She was offered a $500 credit card from USAA without having to prove she had any income. I actually think this is a good thing. She still has the card, same limit. She uses it quite a bit, mostly pays it off, but sometimes at the end of the semester runs a small balance, but has always paid it off. She actually has a higher credit rating than I do (long story)

My younger boys did not get any offers. But my 20 year old wants to get one (he heard about the rewards!). Once we get settled from college starting I am going to have him apply for one. He does have some income from summer (about $5k) so we will see. If he can't get approval, I will co-sign one for him for a small limit ($500). He is authorized user on one of my accounts, but I didn't give his ss# so I don't think this goes to his credit rating (I think this changed with the CARD act)

The main thing that changed with the CARD Act is that college students no longer automatically qualify based on their future income. But students can sign for thousands of dollars of student loans that they can never get out of, but no longer can get a $500 credit card!

[midjd]

Good point, Georgia. We now "protect" kids from being able to max out a $1000 credit card (that they could discharge in BK), but allow them to take out tens of thousands in student loans that will follow them for life...

[suesinfl]

Thanks for the replies, the information provided is what I was looking for. Just to clarify, I don't want her to have a cc just yet because she will not be able to get a job until she's 16. But was wondering if I put her on my card if that would help her or not.

[Opti]

Sue, you may want to read up on the recent credit card legislation that passed including the new scoring by Fair Issacs. I think the credit scoring model has been changed so there is little to no advantage of being an authorized user on someone's credit card for credit score purposes.

[TD2K]

DD will be 15 in one month

Years? Months?

[suesinfl]

years

I've made it this far I don't think I could handle a 15 month again.

Thanks Opti, I'm going to start on searching different websites for articles that talk about teens and money/credit.

[NotSoFair]

I added DS as an authorized user to my CC when he was 15 or 16. When he was in his senior year of high school he found a job that does direct deposit of his salary. So we approached the bank and they opened a 'College checking' for him, also issued him a CC with $500 limit (No, I did not co-sign, this was in 2010). I made him use it at least a month for some small purchases. Recently his CC limit was increased to $1500. His credit history shows the oldest as the one on which he was the authorized user. So, it does matter.

[Peace77]

She doesn't have to have a steady job to have income. She could do babysitting, housecleaning, run errands, help seniors, disabled people or busy mothers in your area to earn money.

Does she have a savings account?

[flopsy]

Aug 18, 2012 17:43:02 GMT -5 oped said:

So, 18-21 year old need to prove they have the ability to pay before a credit card is issued... how is that different from anyone else??

For the first cc I got (I was 22) I have to provide a pay stub to prove I had income. Silly credit union, all of my money went to them so they knew I had income/could pay. For my two other cc's (not from the credit union) I did not have to provide any proof of income. I may have said I make $X on the online application but they couldn't verify that.