Improve my daughter's credit score?

[nrats]

Hi, my daughter recently graduated from college, but still living at home. She's been an authorized user on two of my credit cards for a couple of years, and just got a third card in January in her name only (which she pays off in full every month). As a result, she has a great credit score of 720. But I'm wondering if a score based solely on 1 credit card and 2 "authorized user" cards will be good enough to get a decent interest rate for a new car loan (or home loan, when that time comes)?  I'm willing to put some money into a CD for a cash-secured personal bank loan for her, thinking that will help improve her "credit mix" score. But will it really make a difference? Is it worth it?

Thanks!

[Vinjints]

Following this for advice for my own kids. But does she have student loans open as well? That should satisfy credit mix requirements, along with adding a couple more credit cards down the line.

[Varsity_Lu]

@nrats 

She's a college grad? I'd say let her spread her wings a bit and go this one alone. She got a card in January which is a start. When the six month mark hits, I suggest that she gets another card. Find one with a pre-approval tool that she can check before a HP happens.  Maybe get a third next February.  Then, let them grow and age. I'd also remove her as an AU from your accounts. 720 is a pretty decent score for a very young, very thin file. What she really needs is time for her accounts to grow and age. 720 will get her decent rates, and as her credit file grows and ages, she can  always refinance any loan she may have. At 22 or 23 years old, she needs to do some of this important life stuff without you. Just my opinion.

[nrats]

No, she has no open student loans. 

[GZG]

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@nrats wrote:

Hi, my daughter recently graduated from college, but still living at home. She's been an authorized user on two of my credit cards for a couple of years, and just got a third card in January in her name only (which she pays off in full every month). As a result, she has a great credit score of 720. But I'm wondering if a score based solely on 1 credit card and 2 "authorized user" cards will be good enough to get a decent interest rate for a new car loan (or home loan, when that time comes)?  I'm willing to put some money into a CD for a cash-secured personal bank loan for her, thinking that will help improve her "credit mix" score. But will it really make a difference? Is it worth it?

Thanks!

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they'll want at least three cards where they are the primary, as far as most banks are concerned, their credit score is 6 months old because that's how long they've had credit in their own name. 

'the score' is only part of the application when it comes to underwriting. you can have "an 800 score" but if that score is just because of one credit card in their name with a limit of $500, and two credit cards that don't belong to them, that's not ideal. 

[FicoMike0]

The things you didn't mention are employment and Income.  Those are important for car and home loans.

As far as scores, three cards are best. Her cards, not au. Their reporting paid as agreed monthly will build good history. To max scores, she should do azeo and manage utilization. 

With no Installment loan, a ssl would help. Search the term.

[Thomas_Thumb]

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@nrats wrote:

Hi, my daughter recently graduated from college, but still living at home. She's been an authorized user on two of my credit cards for a couple of years, and just got a third card in January in her name only (which she pays off in full every month). As a result, she has a great credit score of 720. But I'm wondering if a score based solely on 1 credit card and 2 "authorized user" cards will be good enough to get a decent interest rate for a new car loan (or home loan, when that time comes)?  I'm willing to put some money into a CD for a cash-secured personal bank loan for her, thinking that will help improve her "credit mix" score. But will it really make a difference? Is it worth it?

Thanks!

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No need for a loan of any type on file to get scores above 800 and qualify for the best mortgage interest rates. My daugher did both with only 2 CCs on file which she got as a senior in college - no AU accounts, ever.

When her Fico scores 1st reported they were 710-720. SLs were $800 and $1200. Her scores and CLs grew steadily with age. After 5 years both CLs were over $10k and Fico 8s were above 800 after 6 years. 

I'd not bother with a loan but do agree with adding a couple tier 1 CCs with high CL potential. Possibly AMEX BCE and a Discover card or a credit union Visa/MC.

Accounts aging and perfect on time payment history are the key ingredients to building credit. Low reported revolving utilization is critical for high scores but not credit building per se.

[Realist]

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@nrats wrote:

Hi, my daughter recently graduated from college, but still living at home. She's been an authorized user on two of my credit cards for a couple of years, and just got a third card in January in her name only (which she pays off in full every month). As a result, she has a great credit score of 720. But I'm wondering if a score based solely on 1 credit card and 2 "authorized user" cards will be good enough to get a decent interest rate for a new car loan (or home loan, when that time comes)?  I'm willing to put some money into a CD for a cash-secured personal bank loan for her, thinking that will help improve her "credit mix" score. But will it really make a difference? Is it worth it?

Thanks!

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There are multiple paths up the mountain.  Others have contributed sound advice. 

720 credit score isn't a bad deal.  Have a job?

[ForwardLooking]

Understanding you are just wanting to help your daughter, I would caution and not push her towards loans, credit cards, or anything else credit wise.  It is different if she comes and ask you for advise and initiates the conversation.  Also, I would caution against helping her open a secured loan as you are describing as it can hurt your relationship with her if something goes wrong.  Avoid co-signing and avoid enabling her to get credit limits that do not match her ability to pay things back on her own.  I speak as a parent of 5 myself, some of my kids naturally were responsible with their money and credit, and the others I had to just standby and watch as they broke a few eggs and had to clean up their own mess.  I was there for all of them to give hugs and advice when they asked for it.

If she does show interest and initiative, point her to this website.  Let her learn by asking questions and reading about other people's credit journey.  She is an adult and needs to do this journey on her own.  Just don't stop giving her hugs.