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Launching son with credit cards

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tcbofade
Super Contributor

Re: Launching son with credit cards

I'll add to the Discover recommendation.

 

DD#3 started with Discover while still in school.... they gave her some reasonable credit line.  2k?   

02/01/24 Fico 8: EX 757, EQ 803, TU 783.
Fico 9: EX 760 12/16/23, EQ 790 02/04/24, TU No idea.

Zero percent financing is where the devil lives...
Message 11 of 20
Anonymalous
Valued Contributor

Re: Launching son with credit cards


@BachChaconne wrote:

I have an adult son who is a grad student and makes about 25K per year.  Awhile back, I made him authorized user on 3 cards: Discover, USBank, and BP Gas Card -- all with perfect payment history and around 3 years old.  His FICO started out in the mid 700s.

 

Fast forward to this year and figured he was ready to get his own cards.  Tried for the Apple Card since it was soft pull only.  Denied.  They actually listed his Fico score in the 680s (my source of his scores was from Experians 3-credit bureau monitoring service which provide Fico 8s, if I'm not mistaken.  

 

He headed over to Capital One and did the prequalify and was matched with a Quicksilver.  He applied but was only approved for 500 bucks.  I was rather surprised.

 

What should his next steps be?  I am thinking he just sits on the capital one for awhile since it's probably not good to wrack up a bunch of inquiries at this point. But how often and when to apply for additional cards?  What cards next?  Is that capital one going to hurt him?  Should I start removing him as AU from my cards?


I'm not a student, but my credit history is less than a year old, and it's propped up with an AU card as well (my scores started in the high 700s). The boost from an AU card seems to be very hit or miss -- it helps with some lenders, but most look past the AU and see a thin, young file. My recommendation is to ignore the scores, and apply to lenders who are known to be friendly to people new to credit. Which your son did, so this is more confirmation and an explanation than anything else. Lenders don't make decisions solely on scores, so it's useful to think about other factors. Your son has a fairly low income, which will make it hard to get cards from certain lenders (like AmEx), and make it hard to get high SLs. Your son may also have a high DTI, which again can be difficult. The SL of $500 is fairly typical, for someone new to credit.

 

See here for which report different lenders pull:

https://ficoforums.myfico.com/t5/General-Credit-Topics/Which-Report-Will-They-Pull-Part-2/td-p/63797...

Goldman Sachs usually pulls TU FICO 9, which may be why the score Apple gave you doesn't match the FICO 8s. Though I don't know why FICO 9 would be so much lower (mine is higher).

 

I started with Capital One as well, and my SL of $300 hasn't grown, even though I have another card with a CL above $16K. If you're curious, there's a reason why cards get bucketed, and never grow:

https://ficoforums.myfico.com/t5/General-Credit-Topics/Credit-Card-Asset-Backed-Securities-ABS-and-w...

Luckily for me, my Cap1 card was originally a Platinum, and thus has no annual fee, so I can just sock drawer it. But from what I've seen, the QS1 is effectively a trap. They have the same problem with growing, but Cap1 almost never allows a product change to a non-AF card, so the $39/year is probably perpetual. I wouldn't do it right away, but it's likely your son will eventually have to close the card.

 

There's a certain value in getting cards early, and letting them age. But credit seeking looks bad on thin files, and spreading applications out may end up with better results (cf. the adage "credit is a marathon not a sprint"). Since your son's first card is Cap1, that means all potential lenders will see the hard pull on all 3 credit bureaus, so I'd recommend waiting at least a month or two before applying for anything new. I waited 6 months.

 

Discover is probably a good choice. I wish I started with them, as well. They have a prequal tool, which is worth checking. Since your son is a grad student, that opens up the student cards, and Discover has a good one. The rewards for the student version of the Freedom aren't as good, but a lot of people like getting a foot in the door with Chase. There are others -- if your son has a relationship with a bank, see if they have one. Secured cards aren't a bad idea, either. Just check to make sure they have a reputation for graduating their cards to real versions, so the deposit isn't locked up forever. A final option is Navy Fed, if anyone in your son's immediately family (deceased grandparents count) ever served in the military. They're very good with SLs and CLIs, are friendly to people new to credit, and seem to count AUs. With just 6 months of history, I got a card from them with a high SL, and they doubled it 3 months later.

Message 12 of 20
HeavenOhio
Senior Contributor

Re: Launching son with credit cards

Check out credit unions.

Message 13 of 20
BachChaconne
Valued Member

Re: Launching son with credit cards

Wow!  This is a terrific write up... going to email it to him and really appreciate your extremely thorough response!

Message 14 of 20
disdreamin
Valued Contributor

Re: Launching son with credit cards


@HeavenOhio wrote:

Check out credit unions.


Credit unions are not necessarily overly friendly to members with low income and thin files propped up with AU accounts, at least in my limited experience. My oldest tried to get a card from a CU he's (and we've) been a member of for more than a decade. Plenty of money in his savings accounts, but low income, and they would not consider him without a cosigner. I ended up going on the card with him so he could begin to establish his own credit, and the person in the branch assured us that he will be able to have me removed once his profile supports having the card on his own.

Message 15 of 20
PNWRambler
Frequent Contributor

Re: Launching son with credit cards

I would sit on the Capital One for 6 months until those inquiries drop off. Charge a small balance each month (<10%) and then PIF. Then apply for 1-2 more in 6 months. Rinse and repeat. Keep him as an AU as long as you're willing, that will help a lot.

I will also endorse the Discover Student card, that was my first.

Message 16 of 20
HeavenOhio
Senior Contributor

Re: Launching son with credit cards


@disdreamin wrote:

@HeavenOhio wrote:

Check out credit unions.


Credit unions are not necessarily overly friendly to members with low income and thin files propped up with AU accounts, at least in my limited experience. My oldest tried to get a card from a CU he's (and we've) been a member of for more than a decade. Plenty of money in his savings accounts, but low income, and they would not consider him without a cosigner. I ended up going on the card with him so he could begin to establish his own credit, and the person in the branch assured us that he will be able to have me removed once his profile supports having the card on his own.


@disdreamin, there are also credit unions that are extremely generous. NFCU would likely be a great fit if @BachChaconne's son is eligible to join. The bottom line would be to check this board before applying.

 

The Capital One approval wasn't all that bad, although the annual fee would make it a candidate for closure once a replacement Mastercard or Visa is in hand. Without the AUs, the OP's son would have likely ended up with their secured card.

 

The son is likely well positioned for a "full" Discover rather than the student version. I'd give the Capital One card three to six months to age, then apply.

Message 17 of 20
Anonymalous
Valued Contributor

Re: Launching son with credit cards


@HeavenOhio wrote:

The Capital One approval wasn't all that bad, although the annual fee would make it a candidate for closure once a replacement Mastercard or Visa is in hand. Without the AUs, the OP's son would have likely ended up with their secured card.

 

The son is likely well positioned for a "full" Discover rather than the student version. I'd give the Capital One card three to six months to age, then apply.


Capital One approves people with no credit history at all for the Platinum and the QS1, so I think it's likely OP's son would have gotten the card anyway. Happened to me, last year.

 

I think you're correct that OP's son is a good candidate for the regular Discover card, but I also know from experience that Discover is at least somewhat sensitive to fresh hard pulls on thin files. So I concur on the 3-6 month wait.

 

Though that time is a good opportunity for OP's son to learn how credit cards work and develop some good habits. Set up autopay, learn when the lender reports to the credit bureaus, manage utilization (C1 is fine with paying off their cards multiple times a month, if needed), treat it as a debit card, don't get tempted to overspend, pay in full every month, see how long charges and payments take to post, and so on. Explore the Cap1 app and online tools -- virtual cards are great, the credits for online shopping can occasionally be useful, and CreditWise may not give a real FICO score but it's not bad for monitoring changes to a credit report. It's better to develop good practices at the start.

 

Message 18 of 20
TomWB
New Contributor

Re: Launching son with credit cards


@Anonymalous wrote:

@HeavenOhio wrote:

The Capital One approval wasn't all that bad, although the annual fee would make it a candidate for closure once a replacement Mastercard or Visa is in hand. Without the AUs, the OP's son would have likely ended up with their secured card.

 

The son is likely well positioned for a "full" Discover rather than the student version. I'd give the Capital One card three to six months to age, then apply.


Capital One approves people with no credit history at all for the Platinum and the QS1, so I think it's likely OP's son would have gotten the card anyway. Happened to me, last year.

 

I think you're correct that OP's son is a good candidate for the regular Discover card, but I also know from experience that Discover is at least somewhat sensitive to fresh hard pulls on thin files. So I concur on the 3-6 month wait.

 

Though that time is a good opportunity for OP's son to learn how credit cards work and develop some good habits. Set up autopay, learn when the lender reports to the credit bureaus, manage utilization (C1 is fine with paying off their cards multiple times a month, if needed), treat it as a debit card, don't get tempted to overspend, pay in full every month, see how long charges and payments take to post, and so on. Explore the Cap1 app and online tools -- virtual cards are great, the credits for online shopping can occasionally be useful, and CreditWise may not give a real FICO score but it's not bad for monitoring changes to a credit report. It's better to develop good practices at the start.

 


I am curious about how did it went for you paying off C1 card multiple times a month, since it did not go great for me and I have heard most people say C1 likes to see a lot of spendings in terms of CLI. I had no issue doing so with Citi and Discover.

 

Before I closed my QS1, I had a $400 CLI (started at $300, and took the $100 CLI once). Then I decide to do exactly that, hoping that I will get a better CLI next time. As soon as I started to paying off multiple times a month (~3-6 times), C1 started to restrict my account and requested me to call in and verify the ownership of the bank account that I used to pay the balance. I have been using the same account since I opened the QS1, and it's under my name. Then, I continued to pay off multiple times a month using the same bank account, and they restricted my account three times in four months.

Credit Cards:

P2:

Closed Credit Cards:
Message 19 of 20
Anonymalous
Valued Contributor

Re: Launching son with credit cards


@TomWB wrote:

@Anonymalous wrote:


(C1 is fine with paying off their cards multiple times a month, if needed)

 


I am curious about how did it went for you paying off C1 card multiple times a month, since it did not go great for me and I have heard most people say C1 likes to see a lot of spendings in terms of CLI. I had no issue doing so with Citi and Discover.

 

Before I closed my QS1, I had a $400 CLI (started at $300, and took the $100 CLI once). Then I decide to do exactly that, hoping that I will get a better CLI next time. As soon as I started to paying off multiple times a month (~3-6 times), C1 started to restrict my account and requested me to call in and verify the ownership of the bank account that I used to pay the balance. I have been using the same account since I opened the QS1, and it's under my name. Then, I continued to pay off multiple times a month using the same bank account, and they restricted my account three times in four months.


I had (have) a CL of $300. For the first couple months, I just put a token amount on the card. But after some discussion about Cap1 liking to see spend, I started running $350-500 through it a month. I just checked and there was a month where I made 8 payments, and another where I made 6 (both include autopay). Same bank account, never had any problems. In fact, every payment posted the same day.

 

I didn't get a CLI, but that's probably not related. Mine was a Platinum then a converted Quicksilver, but again I don't think that matters. It sounds like you triggered some fraud alert that required further verification. Since I didn't, it may be something unrelated to the multiple payments. And if they use machine learning (likely), it's not necessarily a reason that can be easily deduced by humans.

Message 20 of 20
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