@Thomas_Thumb wrote:Wow, 28.9%! That's the rate you get for having no credit or bad credit. I suspect age may play a role in risk analysis as could length of employment.
We all know that AU accounts don't show credit worthiness of the AU. When applying for a loan they are ignored in a manual review.
To build credit your son should get a secured credit card and possibly a share secured or credit builder loan. A year from now he could likely then get a car loan at half the rate quoted. Longer employment time at a job would help reduce risk as well.
My view has always been credit needs to be earned. Secured cards or student cards are usually the best way to start. Some like credit builder loans.
My daughter started with a couple student cards that later converted to standard versions with higher CLs. No AU accounts. However, she had a year of PT income with an employer and alternate credit from paying monthly rent.
Any lender who ignores authorized user accounts on manual review is, most assuredly, breaking the law. Said lender deserves to be sued into oblivion. Had Capital One not issued my wife a credit card based on nothing more than the fact that I added her as an authorized user, I would have sued immediately and sought class action status. As I already hate Capital One with all the intensity of 10,000 white hot burning suns, it would have given me great pleasure to have done so.
Credit is not something that you earn. Credit is like insurance. Just as a certain number of people are going to get into an accident and a certain number of people are going to have their house caught in a hailstorm, so too a certain number of people are not going to pay their credit card bill. The cost of the defaulting person (or accident) is spread out over the group as a whole. People who manage to get cheaper interest rates by whatever legal means available should not feel any more bad than a person would feel over switching from GEICO to Progressive because the rates are lower.
Credit builder loans (such as the one offered by Credit Karma) are no indication that the person is going to be responsible with credit. You open up a direct deposit account, CK takes out $50.00 a paycheck, and gives you the money back when you hit $500.00. What, if anything, does that prove? It doesn't show that the person won't max out his credit cards. It doesn't show that the person won't lose his job. It doesn't show that the person will remember to make the payments.
Whether a person pays their electric bill, phone bill, or rent on time is a better indicator than that, imo. But, typically, this doesn't show up on your credit.
A long, long, long time ago, I got my first credit card from Orchard Bank. They're not around anymore. I think I paid $70.00 and got a $300.00 credit card. I was responsible with that credit but all that good history was washed away when I left the country. But again — this is risk spreading, like insurance. Perhaps one person out of 5 won't pay, so everybody pays $70.00 and the person who runs up their card to $300 and doesn't pay ends up getting paid for by the 5x$70.
@Zosimus, the problem I'm having with this thread is you came here asking advice, advice which you've received an abundance of from some members extremely well versed in how credit modeling is done, and all you seem to want to do is argue as if you have all of the answers. As a suggestion, if you want advice, ask your questions, evaluate the responses, and move on; this continuous and incessant arguing isn't helping you, and it certainly isn't helping other members learn about how FICO scoring is done. For my part, I'm done watching this thread.
@pizzadude Regulation B, Title 12, Chapter X, section 1002.6b.6(iii) reads "To the extent that a creditor considers credit history in evaluating the creditworthiness of similarly qualified applicants for a similar type and amount of credit, in evaluating an applicant's creditworthiness, a creditor shall consider...on the applicant's request, the credit history, when available, of any account reported in the name of the applicant's spouse or former spouse...."
Therefore, any lender who sees an authorized user account and decides not to consider that information when requested to do so by the applicant, and it turns out that the source of the tradeline is the former or current spouse of the applicant has violated the Equal Credit Opportunity Act of 1974. To routinely ignore this information is to play Russian roulette.
In addition, the lender cannot request information about a spouse or former spouse unless: "(i) the spouse will be permitted to use the account; (ii) the spouse will be contractually liable on the account; (iii) the applicant is relying on the spouse's income as a basis for repayment of the credit requested; (iv) the applicant resides in a community property state or is relying on properly located in such a state as a basis for repayment of the credit requested; (v) or the applicant is relying on alimony, child support, or separate maintenance payments from a spouse or former spouse as a basis for repayment of the credit requested."
So, the lender cannot ask whether the source of the authorized user is the spouse because the lender is prohibited from doing so.
Furthermore, "A creditor that permits an account holder to designate an authorized user may not restrict this designation on a prohibited basis. For example, if the creditor allows the designation of spouses as authorized users, the creditor may not refuse to accept a non-spouse as an authorized user."
These three requirements are the reason that, as the Federal Reserve indicated:
In addition to helping spousal authorized users build an independent credit history, granting authorized user status has been used to help young individuals learn to manage credit and build a credit history. This is possible because creditors generally have followed a practice of
furnishing to credit bureaus information about all authorized users, whether or not the authorized user is a spouse, without indicating which authorized users are spouses and which are not. This practice does not violate Reg. B.
As a result, the information maintained in credit bureau records generally does not distinguish spousal from non‐spousal authorized users. This prevents credit scoring modelers and creditors that use credit reports from distinguishing spousal from non‐spousal authorized user accounts. Since spousal authorized user tradelines must be considered in evaluating creditworthiness to comply with the requirements of Reg. B, but may not be identifiable in an applicant’s credit record, creditors may have to consider all authorized user accounts on an
individual’s credit record, regardless of whether they reflect a spousal relationship to an account holder.
Now, I have no idea why we're having this discussion because it has nothing to do with my original question. ZERO! ZIP! NADA! RIEN!
So, I am asking... politely... that if you don't know the answer to the question of why nothing has shown up on my son's credit profile, then please... DO NOT POST ANYTHING. If you want to have in depth discussions about the legality, morality, and practicality of using authorized users to build credit, please... start your own thread... don't pollute mine further.
