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Our 23-year-old daughter has a card on one of my husband's and my credit accounts, and has had it during high school and college for use in emergencies or other authorized (by us) charges. Not long ago, a saleswoman at a department store talked her into applying for a credit card there, and we found out that our credit card balance was being reported in our daughter's name as well. So she was turned down because her debt level (really ours, not hers) was too high for her income. We were planning to take her name off that account, but we had to keep her on it for a bit because she was on an extended overseas trip and needed access to credit. Now she is home and has a higher paying job than she did last fall. And now she wants to get her own credit card for the first time. But her name is still on that card, so I am trying to figure out how to proceed. If we take her name off it now--will it still be reported as her debt for months afterwards? Or--we could transfer that balance to another card she is not associated with. Would that work? Should we wait a certain amount of time after the transfer? Our own credit scores are excellent because our total debt is not high compared to our joint income--but that balance is likely too high for her income (I'm not sure really—the balance is 7K and her income is a tad under 40K.) I don't want to proceed until I can figure out a way to proceed that won't harm her credit right at the start. She has zero experience with credit and no student loans. All she has is that one turn-down before we realized that our debt was being reported in her name, too. Any suggestions?
The best thing you can do for your daughter's score is to leave her as an AU, but payoff/transfer all that is owed on that card. Her report should update within a week of the card's next statement.
This is better than removing her AU status as this way she continues to get the boost from having access to this credit line for all these years. If you remove her she will have an empty credit report and may not be approved at all.
@Aahz wrote:The best thing you can do for your daughter's score is to leave her as an AU, but payoff/transfer all that is owed on that card. Her report should update within a week of the card's next statement.
This is better than removing her AU status as this way she continues to get the boost from having access to this credit line for all these years. If you remove her she will have an empty credit report and may not be approved at all.
+1
This is what you need to do:
Pay down or transfer most of the AU card balance. You NEED to have that card reporting more than $0. You want it to report somewhere in the neighborhood of $100 to $300. If it reports $0 it will actually drop your daughter's score. A week after the AU card due date where it reports the small balance due, your daughter can start applying for her own credit cards.
Now...This is important...
Some lenders are more friendly to people that have a limited credit history than others. You need to make sure that you are applying for the correct cards or she will be denied again.
To build a good history and have the ability of achieving the highest scores, she NEEDS to have at least 3 credit cards.
I would suggest that she apply for the following 3 credit cards when she is ready:
Discover IT
Chase Freedom
Capital One Quicksilver
She should then wait a year and then apply for 2 more cards. You want to end up with 5 to 8 quality credit cards that you can keep open for life. There are 2 FICO calculations that can only be bought with time. They are AAoA (Average Age of Accounts) and Oldest Open Account. You want her to keep these credit cards open for the rest of her life if possible. That's why it is good insurance to choose different lenders. In case something happens to one or more of them in the next 20 years you still have backup old cards.
Perhaps others can chime in with their suggestions on good quality starting credit cards.