So recently I might've gotten a little crazy with building my credit up. I'm 25 and have only had anything on my credit report for 3 years now. I wish I would've started earlier and had more information, but I just didn't know any better. Well my little sister is 18 and just graduated high school yesterday. I'm trying to get her a head start like I wish I would've had. I'm also talking with my mom to help her out, but she doesn't know much about how credit works either. So basically I'm wondering, would it be better for my 18 year old sister to be added as an AU on my mom's account or to try to get her own secured card of some sort? Or is there another option for her? What would be best for her at this point? Thanks for the help.
Adding an AU is, providing it adds positive scoring value, beneficial if a prospective creditor does not do a manual review in their evaluation process.
However, if the prospective creditor does a manual review and sees the presence of an AU account, that informs them that the score they are viewing is not based only on the named consumer's credit history. Thus, they may discount the value of the score in their decision making.
In rebuilding, many prospective creditors will not invest in a more detailed manual review, and will rely primarily on a credit score.
Thus, adding an AU can be a great rebuilding tool.
However, as the consumer progresses and begins to apply for higher or better terms of credit, the chances of a manual review increase, and it may be beneficial to remove any AU account, even if they are providing a positive score increase.
The answer is that it might be a great idea, as a solution to help your sister get started (first 24 months, say).
We cannot know how great of an idea it is yet till we know more about the three cards. Of those three, is there one that is:
(1) Is at least 6 years old? (10 years or more would be better)
(2) Is a card your mom could keep at either $0 or an extremely low utilization?
(3) Has no derogs of any kind? Not even one late a long time ago?
If so, then adding your sister to that would be a great decision.
The answers to these questions can be found by pulling the credit reports for your mom at all three bureaus. Regardless of what you all decide, this is something you should help your mom do.
Does your mom understand that if her daughter is late on a payment or other bads it effect's her? I'll go on a whim and say your sister is trustworthy but I've seen Au's mess up before and the effect it has..