Young people and credit

0patience

My youngest son has always paid cash for everything.
His car is paid for, he has no bills and been at his job for several years.
Lately, he has been thinking about getting a travel trailer to live in, as rent for a single bedroom apt here is $1500.
So he thought he should try and get a credit card to bolster his credit.
He found out that while he doesn't have bad credit, he has zero credit. Nothing.
All the credit reporting places have it marked as N/A.

So now he's gonna go to his bank and see if he can get a loan on his car, to see if he can build some credit.
How are young people getting credit?
You have to have credit to get credit, but you can't get credit if you have no credit.
It's a nasty cycle.

I offered to co-sign a loan, but he wouldn't have it. He wants to do all this on his own.

*end of rant.

Sleddog46

He needs to apply for credit at a local store like Wal-Mart etc. Then pay off his balance and get his credit line increased so it shows he is responsible. That's how I did it back in the day. 

Wylaff

Most banks offer pre-paid credit cards. You can build the credit without any risk.

0patience

Sleddog46 said:

He needs to apply for credit at a local store like Wal-Mart etc. Then pay off his balance and get his credit line increased so it shows he is responsible. That's how I did it back in the day. 

He tried at walmart, costco and one other, can't recall what it was.
They all denied him.
They all cite "lack of information".
He paid cash for his car and doesn't owe money on anything.
Any medical, he goes to Indian Health and that's paid for.
So not even medical bills.

I never considered that the lack of buying anything on credit was a detriment.

0patience

Wylaff said:

Most banks offer pre-paid credit cards. You can build the credit without any risk.

He's going to the bank tomorrow.
There is a person there that helps their customers figure credit out.
Hopefully, they'll get him started.

CalvinAndHobo

I got a credit card 7 years ago when I was 19 without any credit for this reason, I used it a couple times a month at different locations on small purchases (which matters instead of letting it sit unused), and I paid it off every month. I didn’t have any other forms of credit or debt. It seems like that is enough to get started though because when I moved back to Chicago, I switched banks and got a new card, and they gave me a credit limit that was $7,500, instead of $500 like before. My advice would be to get a credit card, accept that it’s going to give you bad rates, use it to buy gas or food every now and then, and always pay it on time so the bad rates don’t matter. 

0patience

He asked how I got credit and why my credit score is so high.
I told him that I honestly had no idea, other than I have been at the same job for 23 years, make good money and have no mortgage payment anymore.
Makes a lot of difference. LOL!

silvermouse

our economy is based on debt. Debt is how banks make money. If you owe the bank money, like through a mortgage, and pay what is due each month, you'll have good credit because the banks will see they can profit from you.

Martel

I got a CC in college. Low limit. High interest.  Tried to never carry a balance. 

Student loans helped, too.

But there are times I wish I had no credit score.  Simpler.  I'm not a huge Dave Ramsey fan, but he's been known to say the best credit score is not to have one.  But it's truly impossible. You can't rent a car or stay in a hotel without a CC, unless you want crazy, crazy holds on your bank account.  You can't buy a house or car unless you pay the whole thing up front, which can work, but is impossible for most young folks starting out.

My wife used to work at a bank that offered a "credit helper" loan.  You took out a loan, secured with a CD.  You paid back the loan on installments and at the end, I think it was a wash because the bank kept the CD interest or something; there was probably a starting fee, because I can't imagine they didn't make money.  But it counted as an installment loan and cost very little to us.

Both our kids were in the NICU when born, and my wife was on bed rest with home health care for most of both pregnancies.  We declared bankruptcy after some job losses and trying for years to pay that off.  Waiting the 7-10 years for that to drop off the credit report was the easiest score bump I ever got!  We went up something like 150 points overnight once it cleared.

BKDog

Whatever bank he belongs to should be able to help. Once he has the first CC he can pay the balance off each month or make payments on time and build credit. The trick he should know is to try to never go above 30% of your available credit. It's only a medium impact at most, but it is important to maintain "utilization" under 30%. If the bank doesn't help, I highly suggest a credit union. The credit union should do everything possible to help build credit and offer loans. Try a newer one in your area that may be looking for members.
Another idea for down the road once he has some credit history, say 1 to 2 years and maintains 100% payments, is to get an American Express card that would suit him. Blue Cash AMEX is pretty awesome, and they will fast track him to $8,000 credit or higher in the matter of 6 months to a year with good standing. I believe I got that card and was given more than $10,000 in that time, got a gold card and a cash magnet all from Amex and they've been pretty awesome to me. Tell him not to get any low end cards from no name bank outfits who will not offer easy pay online or linking to your bank account or charge annual fees. Sometimes they don't even report to credit agencies on time or frequently, and he's got to build credit. The Wal-mart card is pretty good, too. They will fast track him pretty fast and they have a good website pay setup. Chase is finicky, but a very good company for a 3 year credit history account, and they will also do a great job at helping to monitor and build credit. Capital One is great with monitoring your credit once you get a card with them, and the Journey card is great for younger folks, and I also recommend the Quicksilver for later maybe after a year or two. All of these cards have zero annual fees except the AMEX Gold, but the AMEX Gold card has no spending limits (can be capped at around 40k) but it has to be paid off the following month unless you enroll in budget pay, which would allow it to work more like a regular card but may have different rates and whatnot. As far as Discover goes, I wouldn't get one until after 3 to 4 years credit history and a solid 740+ score just to be safe, but that's far down the road. Bank of America was my first card I got since I banked with them for a long time, but I imagine they require some credit history these days.

Trykflyr_1

He should be able to take rent, utility & phone payment history and that shoukd help him out.  It shows responsibility and consistency.

Markwell

Have him get a secured platinum card through Capital One. I've had one 9 months now and just got my first unsecured last month. It will take him a good 6-8 months to have a decent score. Rule of thumb, spend 10% of the credit line and pay that sucker off the day it comes due. 

Just my opinion but never go through the bank. The interest rates are crap and unless they're a huge bank they usually don't even want to offer you a loan afterwards. Try a credit union before a bank. They really helped me with my first car loan. 

webmost

When I was about to graduate college, a number of banks sent me credit cards in the mail.

I gave them on a bench at the bus station