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kristindy
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Registered: ‎02-28-2008
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Recent grad trying to build credit- credit union or bank for first credit card?

My boyfriend is graduating with his master's degree in a few weeks. While he has a scary amount of student loans, he has never had a credit card. In about 6 months, we plan to move in together to a big city, and we want to do whatever we can so he can establish some credit by the time we're trying to find an apartment. My credit is great- last time I checked it about a year and a half ago, my fico was 770, and I'm paying off my credit card debt entirely next month (still have car/student loans though.

 

 

He currently banks with a credit union. Would he be better off trying to get his first card through the credit union (through his university) or through a national bank (that has branches in his current city as well as where we want to move), or somewhere else entirely? What's the best way for someone with only student loans to build credit?

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haulingthescoreup
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Re: Recent grad trying to build credit- credit union or bank for first credit card?

I'm guessing that if his only track record in credit is his SL's, his CU is the way to go. They already know him, and presumably he has been responsible with his checking account and so forth. Make sure that they do offer CC's, though. Not all CU's do.

You might want to consider adding him as an authorized user (NOT a joint user) on one of your cards. You would want to use one that is fairly old, with a decent CL, squeaky clean, and that reports $0 on the statements --not just reporting $500 which you then pay off.

Lenders are wise to AU cards, and they know that they don't genuinely reflect the credit history of the AU, but they can help FICO scores.

I think the combination of an AU card (do this first) and a CC from his CU will be the start he needs. In six months, he can then check out a national-bank issued card, depending on how his FICO's look by then.
* Credit is a wonderful servant, but a terrible master. * Who's the boss --you or your credit?
FICO's: EQ 781 - TU 793 - EX 779 (from PSECU) - Done credit hunting; having fun with credit gardening. - EQ 590 on 5/14/2007
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kristindy
Posts: 5
Registered: ‎02-28-2008
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Re: Recent grad trying to build credit- credit union or bank for first credit card?

Thanks for the advice! He actually has accounts withtwo different credit unions- one with the university he goes to (checking/savings), and a savings account with the Navy Federal Credit Union (his parents were both in the Navy and started this account a long time ago). Does it matter which one? He uses the university accounts more actively, but I'm not sure if that matters or not.

 

 

If I made him an AU on one of my accounts, would he need to actually use the card for it to show up on his report? Since I'm paying my only card with a balance off next month, I had planned on only using it for gas and PIF every month. (I had been carrying a balance that peaked at almost 5k and hovered around 2k for about 4 years, so I'm really hesitant to do ANYTHING that could jeopardize my having it completely paid off!)

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haulingthescoreup
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Re: Recent grad trying to build credit- credit union or bank for first credit card?

If he's already in with Navy, I would definitely recommend that he app with them for a CC. They have great products.

As for AU cards, my personal belief is that if they're being used to help the AU's credit profile (as in your BF's case), the honorable thing to do is for the AU to never, ever use the card. They don't even need to have the physical card. All your activity (charges, payments, etc.) will report on his reports, and he doesn't have to use it at all.

The other, more traditional, use for an AU card is for a married couple/ committed partners to share a card for common household expenses, just as they might have a joint checking account. But when it's for credit-history building, my vote is to never actually use the card, but just to be grateful for its assistance in building history. Just IMO.
* Credit is a wonderful servant, but a terrible master. * Who's the boss --you or your credit?
FICO's: EQ 781 - TU 793 - EX 779 (from PSECU) - Done credit hunting; having fun with credit gardening. - EQ 590 on 5/14/2007
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MarineVietVet
Posts: 14,084
Registered: ‎07-14-2009
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Re: Recent grad trying to build credit- credit union or bank for first credit card?


kristindy wrote:

Thanks for the advice! He actually has accounts withtwo different credit unions- one with the university he goes to (checking/savings), and a savings account with the Navy Federal Credit Union (his parents were both in the Navy and started this account a long time ago). Does it matter which one? He uses the university accounts more actively, but I'm not sure if that matters or not.

 

 

If I made him an AU on one of my accounts, would he need to actually use the card for it to show up on his report? Since I'm paying my only card with a balance off next month, I had planned on only using it for gas and PIF every month. (I had been carrying a balance that peaked at almost 5k and hovered around 2k for about 4 years, so I'm really hesitant to do ANYTHING that could jeopardize my having it completely paid off!)


Welcome to the forums.

 

He will inherit the entire history of the account and wouldn't need to ever use it in order for it to show on his reports. 

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kristindy
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Registered: ‎02-28-2008
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Re: Recent grad trying to build credit- credit union or bank for first credit card?

Update:

He applied for a card at Chase, and ended up getting instantly approved  for a student card with a $5k limit!!! The interest rate is extremely high.

 

Why would Chase approve such a high limit for someone with new credit? Are they just expecting to turn around and max it out?

 

Followup: Now that he has it- how much should he use it? Would a large purchase (a video camera he could use for freelance work- approx. $2k) be too much utilization for a $5k limit?

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MarineVietVet
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Re: Recent grad trying to build credit- credit union or bank for first credit card?


kristindy wrote:

Update:

He applied for a card at Chase, and ended up getting instantly approved  for a student card with a $5k limit!!! The interest rate is extremely high.

 

Why would Chase approve such a high limit for someone with new credit? Are they just expecting to turn around and max it out?

 

Followup: Now that he has it- how much should he use it? Would a large purchase (a video camera he could use for freelance work- approx. $2k) be too much utilization for a $5k limit?



Optimal credit utilization for FICO scoring purposes seems to be:

Total revolving utilization > 0 and < 9%, the lower the better, and
Reporting a balance on less than half of your revolving TL's, and
Reporting a balance on half or less of all TL's.

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beamMEup
Posts: 4,473
Registered: ‎12-31-2008
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Re: Recent grad trying to build credit- credit union or bank for first credit card?

It's good that he app'd at Chase, because FICO likes to see at least one bank card/account.

 

If he decides to app for a card at PenFed, he may find they're more generous than Chase with CL's; which would help with keeping utilization down.

 

Good luck!

Just puttin' syrup on something, don't make it pancakes.
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haulingthescoreup
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Re: Recent grad trying to build credit- credit union or bank for first credit card?

[ Edited ]
Tell him to use the card, but never to charge more than he has money in the bank to pay it off with.

In other words, don't carry a balance, ever.

Chase will be happy that he's using the card (they get merchant fees for all his charges.)

If he pays off the balance before the statement date, so that it reports a $0 balance to the credit bureaus, FICO will be happy.

If he doesn't carry a balance, and therefore never pays a penny of interest, and never is at the mercy of a credit card company, he'll be happy. :smileyhappy:

It's not unusual for student cards to have high CL's, because banks adore having students run up high balances and have to pay killer interest. Also, do you know if they asked his major when he applied? There is some indication that if a student has a major that is likely to result in a good income, they will receive a higher CL. (Think engineering majors.)
Message Edited by haulingthescoreup on 12-03-2009 05:38 PM
* Credit is a wonderful servant, but a terrible master. * Who's the boss --you or your credit?
FICO's: EQ 781 - TU 793 - EX 779 (from PSECU) - Done credit hunting; having fun with credit gardening. - EQ 590 on 5/14/2007

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