topic Re: Credit Building in General Credit Topics

Credit Building

Zosimus — Wed, 29 May 2024 23:13:52 GMT

My son turned 18 on 25 May 2024. The months before his birthday, I added him as an authorized user on every credit card I have with good usage ratios. I also mailed a photocopy of his social security card to all three bureaus indicating his full name, date of birth, current address, and (of course) the SSN. On the 27th, I took him to shop for a car. He had no credit profile. I also got something back from Experían saying that they couldn't find his report in their system (kind of a dumb answer if you ask me).

Is it because he was under 18 that none of the credit loaded onto his profile? I added him on three of my wife's accounts yesterday. Is he going to end up with some kind of a profile soon?

Re: Credit Building

Thomas_Thumb — Thu, 30 May 2024 02:08:12 GMT

I believe there needs to be an open, active account on your son's CRA report with atleast 6 months history to generate a Fico credit score. Some issuers list account open date as date when the AU was initiated. The AU cards may not instantly report to the CRAs. CC issuers usually report on a monthly basis shortly after a statement close date.

You need credit info reported to have a credit file.

Re: Credit Building

Snook_on_the_Line — Thu, 30 May 2024 01:16:51 GMT

I would look into a secured credit card from the bank or credit union you and your son already do business with to start off building some positive payment history.

He needs to make a few months of on time payments on an account that he is solely responsible for to generate a fico score.

Being added as an AU on your parents cards used to be a shortcut to a good score but the newer fico scoring models largely ignore authorized users on other peoples cards.

Re: Credit Building

FicoMike0 — Thu, 30 May 2024 02:15:40 GMT

I would agree that his having his own account is the best way to start his credit history. If he has a bank account that's a good starting place. There are also several student cards available, I don't think they all even require you to be in school. Either might avoid going secured.

Re: Credit Building

Snook_on_the_Line — Thu, 30 May 2024 02:26:47 GMT

@FicoMike0 wrote:
I would agree that his having his own account is the best way to start his credit history. If he has a bank account that's a good starting place. There are also several student cards available, I don't think they all even require you to be in school. Either might avoid going secured.

Didn't think of that, but yeah, student cards are an another option that caters to those with little to no credit history.

Re: Credit Building

keekers — Thu, 30 May 2024 14:16:21 GMT

@Thomas_Thumb wrote:
I believe there needs to be an open, active account on your son's CRA report with atleast 6 months history to generate a Fico credit score. Some issuers list account open date as date when the AU was initiated. The AU cards may not instantly report to the CRAs. CC issuers usually report on a monthly basis shortly after a statement close date.

You need credit info reported to have a credit file.

Can confirm. My son was an AU on a few of my cards for a couple years before he turned 18. He didn't have a credit report after he turned 18 until he opened his own account.

Re: Credit Building

Zosimus — Thu, 30 May 2024 15:14:52 GMT

All right, so there have been some answers, but I must say that I don't consider any of them satisfactory.

Possible answer: You need six months' worth of credit history to make a FICO score.

Yes, fine. But, that doesn't explain no credit profile at all.

Possible answer: Maybe the statement date hasn't come and gone.

Yes, but I've been working on this for 2-3 months. Surely at least one statement date has come and gone.

Possible answer: You should get him a student credit card.

No. He's not a student.

Possible answer: Authorized users don't count for calculating a score.

False, but even if it were true, it wouldn't explain no credit profile. In reality, by law, a spouse has the right under the ECOA to the credit of his/her partner. Since the FICO algorithm cannot determine whether the authorized user is the spouse, the authorized user does count. And even if it did have some limited ability to distinguish whether someone was a spouse, the fact that we have the same last name and the same address would probably make it impossible for the algorithm to determine.

Possible answer: Get a secured credit card.

Why is that better than, let's say, using Kickoff Credit Builder or getting a Fingerhut card or signing up with Cred.ai?

At any rate, I added my son on three of my wife's credit cards (now that he's 18), and one of them has a statement date of 6/6/2024, so we'll see what happens.

Re: Credit Building

RSX — Thu, 30 May 2024 16:37:52 GMT

I am not sure that disparaging the people trying to help, is going to generate more help for you

everyone is jumping in with advice

he went for a car loan 2 days after his bday - and there is no credit report for him yet

you say you started 2-3 months ago - great - but the answer is that it can take up to 6 months

and the note about the Student card specifically said that some institutions do not require him to be an active student - it is more a 'young adult' program that is for people of school age

i would recommend the secured card at the bank he currently has a checking and hopefully a savings account at - start with a $300 card and have him use it regularly throughout the month

sign him up for a credit report service and he can check monthly until his first score appears

then it might be time for the car loan - though likely the terms will not be favorable since he may start with a low score

good luck to him!

Re: Credit Building

JoeRockhead — Thu, 30 May 2024 17:15:22 GMT

@Zosimus wrote:
All right, so there have been some answers, but I must say that I don't consider any of them satisfactory.

Possible answer: You need six months' worth of credit history to make a FICO score.
Yes, fine. But, that doesn't explain no credit profile at all. It does if he's only been listed as an AU for 3 months. Also, many Fico scoring models ignore many attributes of AU accounts. This was the reason it was suggested he get his own card. A revolver, from a major lender, no store cards or sub-prime lenders

Possible answer: Maybe the statement date hasn't come and gone.
Yes, but I've been working on this for 2-3 months. Surely at least one statement date has come and gone. As mentioned, it generally takes around 6 months to generate a Fico score

Possible answer: You should get him a student credit card.
No. He's not a student. Fair enough, but not all student cards are strictly for students, they're meant to be for students (or young people) trying to establish their own credit history.

Possible answer: Authorized users don't count for calculating a score.
False, but even if it were true, it wouldn't explain no credit profile. In reality, by law, a spouse has the right under the ECOA to the credit of his/her partner. Since the FICO algorithm cannot determine whether the authorized user is the spouse, the authorized user does count. And even if it did have some limited ability to distinguish whether someone was a spouse, the fact that we have the same last name and the same address would probably make it impossible for the algorithm to determine. The ECOA doesn't grant the right to a credit score, or credit profile. It was established to prevent discrimination on the basis of race, color, religion, national origin, sex, marital status, age, receipt of public assistance, or good faith exercise of any rights under the Consumer Credit Protection Act.

Possible answer: Get a secured credit card.
Why is that better than, let's say, using Kickoff Credit Builder or getting a Fingerhut card or signing up with Cred.ai? A secured card from a major bank, or CU is better than any sub-prime option. Especially when you consider that often they'll come with a increase in credit limit when they graduate.

At any rate, I added my son on three of my wife's credit cards (now that he's 18), and one of them has a statement date of 6/6/2024, so we'll see what happens.

Re: Credit Building

Thomas_Thumb — Thu, 30 May 2024 21:52:04 GMT

End of the day AU cards can't demonstrate responsible credit management on the part of the AU card holder. The AU is not accountable for payments.

If you want to help your son build credit and demonstrate responsible CC use, he needs a card of his own. The best way to do that starting out is for him to get a secured card with a $500 limit.

Just read a post yesterday of someone with a $500 CL Discover IT secured card graduating to a standard IT card. Only took 8 months and limit was increased from $500 to $2000. Those cards can grow to $30k-$50k CL.

A newby gets more bang for the buck scorewise building revolving credit payment history than installment loan payment history. Scores can reach 810-820 with just a couple cards and no loans or AU accounts after 5 years. That being said, both types of accounts play a roll and an Auto loan will help with credit mix.

However, auto loan lenders generally ignore AU accounts in decisioning. So, any loan would need to be cosigned by the OP or someone else with payment history. If there is a guaranteed cosigner the son may be able to get a loan with no credit file assuming some income source. The loan payments will build history allowing for a Fico score 6 months later.

Re: Credit Building

Zosimus — Thu, 30 May 2024 18:07:38 GMT

@JoeRockhead From the Federal Reserve (https://www.federalreserve.gov/pubs/feds/2010/201023/201023pap.pdf )

"The Federal Reserve’s Regulation B, which implements the 1974 Equal Credit Opportunity Act, requires that information on spousal authorized user accounts be reported to the credit bureaus and considered when lenders evaluate credit history. Since creditors generally furnish to the credit bureaus information on all authorized user accounts, without indicating which are spouses and which are not, credit scoring modelers cannot distinguish spousal from non‐spousal authorized user accounts. This effectively requires that all authorized user accounts receive similar treatment."

I can assure you that when I added my Peruvian wife to my accounts as an authorized user, she immediately got a very favorable credit score, qualifying her for a Capital One Quicksilver Card (and she didn't even have a social security number, only an ITIN). There was no six-month waiting period. It was instantaneous.

Re: Credit Building

Thomas_Thumb — Thu, 30 May 2024 19:31:51 GMT

@Zosimus wrote:

I can assure you that when I added my Peruvian wife to my accounts as an authorized user, she immediately got a very favorable credit score, qualifying her for a Capital One Quicksilver Card (and she didn't even have a social security number, only an ITIN). There was no six-month waiting period. It was instantaneous.

How long ago was that?

The older Fico 98 and Fico 04 models used for mortgages consider AU accounts the same as primary. However, due to rampant abuse, the Fico 8, 9, and 10 algorithms were changed to discount AU accounts. These models ignore AU accounts in utilization and most other credit scoring factors.

Another appropriate change is some CC issuers (should be all- imo) no longer allow backdating on AU accounts. AU account history starts when the AU account is activated.

One of the drivers for these revisions was creation of bogus AU accounts by primary cardholders. The primary would be paid a fee to list someone as an AU. The phantom AU would not be issued a card or be given access to the primary account. However, the AU would leverage the account to create a credit file and then secure credit on their own to commit fraud.

I would suggest having the AU use their new AU card(s) to show legitimate activity.

Re: Credit Building

RSX — Thu, 30 May 2024 19:15:25 GMT

@Zosimus

perhaps this is why your son didn't immediately show up as an AU - since you already have one - which would cover the spousal part

i am not sure the answer to this, but i also dont know what difference it would make for your path forward

are you looking to report the CC companies to someone, to try and resolve this (your) confusion?

not sure what else anyone can say, other than let us know after 6 months if he gets a credit score

Re: Credit Building

Zosimus — Thu, 30 May 2024 20:09:16 GMT

@RSX wrote:
@Zosimus
I can assure you that when I added my Peruvian wife to my accounts as an authorized user, she immediately got a very favorable credit score, qualifying her for a Capital One Quicksilver Card (and she didn't even have a social security number, only an ITIN). There was no six-month waiting period. It was instantaneous.

perhaps this is why your son didn't immediately show up as an AU - since you already have one - which would cover the spousal part

i am not sure the answer to this, but i also dont know what difference it would make for your path forward
are you looking to report the CC companies to someone, to try and resolve this (your) confusion?

Why would I be "looking to report the CC companies to someone" when I'm not sure the CC companies are the problem?

Nor do I agree that "you already have a spouse in their system" is an explanation because, for all they know, I divorced and got remarried.

Experían says:

https://www.experian.com/blogs/ask-experian/does-your-child-have-a-credit-report/

This seems to indicate that something could have been on his report, but nothing is there....

Anyway, he has Credit Karma on his phone now, so if something does show up, we'll know. But, it's still a mystery to me why nothing is there.

https://consumer.ftc.gov/articles/prescreened-credit-insurance-offers says

"Credit bureaus don’t keep credit files on minor children, but if you suspect an identity thief used your child’s information for fraud, submit an opt-out request for them. Send a written request to each of the credit bureaus. Your request must include your child’s full name, address, and date of birth. Include a copy of your child’s birth certificate, a copy of their Social Security card, and a copy of your driver’s license or other government-issued proof of identity."

So maybe the CRAs have been receiving reports but they've just been discarding the information because the child was underage?

As I said, I sent a copy of the social into the big 3 because I wanted them to have it in their system so that when my son signed up for the Experian app or Credit Karma, the social would be in the system, everything would match, and there would be no hitches. I didn't expect Experían to write back and say, "We have no file." As I said, I thought that was a stupid answer. "Thanks. We'll create a profile for him" would have been a better answer.

Bankers Online shows that someone asked about reporting credit information about minor children, and the consensus seemed to be that it depended on the state. Yet, Arizona does not have any additional credit reporting laws. So, again, I'm mystified.

But, as I said, I added him to three more credit cards (my wife's) just a day or two ago, and I hope that this will generate a profile of some sort regardless of whether it will take 6 months to see a score because the score isn't the point.

Re: Credit Building

Thomas_Thumb — Thu, 30 May 2024 21:17:14 GMT

Experian's response: "we have no file" was correct and proper. As mentioned early in this thread, credit must be reported for there to be a credit file. Why no credit reporting is not Experian's concern. That is up to the credit issuer.

If the person of interest was under 18 and the credit issuer has no obligation to report the AU, then great - no file.

Re: Credit Building

Zosimus — Thu, 30 May 2024 21:18:29 GMT

Your answer would tend to imply that my decision (to add him to new credit cards) is the right approach — now that he's 18, it is reasonable to think that credit issuers are more likely to report now than they were a month ago.

Re: Credit Building

FicoMike0 — Fri, 31 May 2024 02:01:22 GMT

I think the sure way for him to have a credit file is to have credit. Many of the "student"credit cards are open to all young adults. If he has a banking relationship, that bank may approve him for a low limit unsecured card even if he's unscorable. 6 months of any activity and now he's scorable. The score of a young, thin file will grow rapidly with no baddies holding it back. Once a file is established and scorable, the au thing may help with age metrics.

Best luck.

Re: Credit Building

Zosimus — Fri, 31 May 2024 16:50:14 GMT

Well, the goal is to have him get credit, in the form of a car loan. And he was offered a car loan... at 28.99% APR, a rate I considered excessive.

Re: Credit Building

ForwardLooking — Fri, 31 May 2024 16:59:47 GMT

Congrats on your son's 18th Birthday. My suggestion is to slow down and encourage your son to start building credit organically and slowly rather than trying to jumpstart as an AU and piggybacking on your credit profile. This does not work the way it used to and there are good reasons for this. Instead, encourage your son to find a good credit union and establish a relationship there. Remember, now that your son is 18, he is nothing more than a friend (or roommate if still living at home) in the eyes of creditors. He is not afforded any rights or benefits for being a family member in the eyes of creditors (or the law) like your wife may be. Unless you are willing to be a co-signer, he will probably have to wait before getting a major loan, like the car loan. But I would strongly recomend against going this route and would never advise anyone to cosign a loan with anyone other than their spouse. Patience and time, along with good organic credit building methods, is the answer to solving most of your questions.

Re: Credit Building

Zosimus — Fri, 31 May 2024 17:40:23 GMT

@ForwardLooking wrote:
Congrats on your son's 18th Birthday. My suggestion is to slow down and encourage your son to start building credit organically and slowly rather than trying to jumpstart as an AU and piggybacking on your credit profile. This does not work the way it used to and there are good reasons for this.

This is just not true. On February 1, 2004, I left the United States, and did not return until 2017. All of my credit, the good, the bad, and the ugly was gone. I had no score of any kind. I obtained an authorized user card, which posted to my credit profile in October.

So, although I don't know how FICO 9, handles authorized users, I do know how FICO 8 does. Last I checked, that was still a fairly popular scoring model.

In conclusion, I don't understand why everyone is trying to dissuade me from helping my son, but I'm still going to do everything in my power to help him short of co-signing for the car. That I will not do.