Teaching 19 Year Old About Credit

[Anonymous]

Good morning all.

im trying to teach my 19 year old about responsibly using credit. This was something I was never taught as my mom had horrible credit and we never lived within our means.

My son has a much better head on his shoulders than I did at that age, thank goodness. He had no credit, so I added him as an authorized user on my NFCU and Discover cards. If he uses them, he pays me cash in full for what he spent. It has only been 4 months so we cannot yet pull a credit score for him.

I did try to open him a Credit Strong and Self savings loan, but we had difficulty because his information wasn't recognized. Doing the NFCU CC preapproval, he was pre approved for all of their cards.

What do you guys recommend as the next step so I can get him a healthy, manageable credit mix?

[Anonymous]

NFCU SSL + CC would be good

He should have FICO scores if he's an AU on accounts at least 6 months old, unless they're excluded for whatever reason

[Anonymous]

February is month 5 so it will be March or April when we can access them.

[Credit4Growth]

If your 19 year old has no open installment loans then a Navy SSL which you can pay in advance to 8.9% utilization without shortening loan term will be great add to the mix also doubling as a great tool t begin building a relationship with them.  I would apply for this as soon as possible.

For a CC, first and foremost I would first apply for an unsecured card with Navy a few months after the SSL has been opened and reporting.

I do not have any idea as to how you feel about a secured cc.  If that was already on your mind then I would also recommend applying for one with Navy as well to add to building up the relationship with this FI.  

Later down the road after a secured CC graduates it can be PC'd to a different card that has a greater use/benefit.  Toward the end of this year or early next year (with or without getting 2 or 3 primary trade line for your 19 year old) they should be in very good shape score wise with also having a little bit of a credit mix.

For the purpose concerning credit mix I started my journey with an installment loan, a CC and a LOC then waited 5 or 6 months before applying for additional credit products.

The following may not directly apply to your circumstances but I wanted to supply a link to a thread I read in the past concerning how to handle and use CC's based on others advice.  Monthly activity seemed to be one important key that stood out to me as someone begins to build/rebuild a profile.  Another one is time.

You may not see it as informative as I did but here is the link.

https://ficoforums.myfico.com/t5/Bankruptcy/HOW-TO-From-BK7-discharge-to-700-in-24-months-or-less/m-...

[Anonymous]

If you're NFCU or Discover card is more than six months old, he should already have a score.

as others have said, that SSL would be nice as would 3-5 bankcards that have no AF and are keeper cards. You need to pull his scores and see what they are now, do the SSL, pay it down, get the scores up, and then go for two or three cards, and then wait six months or a year and get a couple more, and then stop and don't do anything else but let it age. JMHO. 

[Anonymous]

make a credit karma account for him and see if you can pull his record with those two cards on it.

[Anonymous]

I had no credit until I was almost 30, honestly, and it didn't really make any difference if you budgeted, dealt with real landlords instead of hedge funds that also want $50 per cat each month please and thank you, and paid cash for your clunker.

The fact that credit really is pretty much irrelevant unless you live in a major city where landlords are more skeptical of people or want credit card points (which most people can't manage responsibly and the banks know that) is probably the best kept secret in the industry. Even Dave Ramsey is skeptical of points schemes and not using zero based budgeting.

Most people worried about their credit want to finance things they can't afford and won't own for decades.

Post-bankruptcy (life emergency which ruined my credit again anyway) I'm rediscovering how little credit scores are relevant anyway past maybe renting an apartment, which I'm obviously doing again. And even at that, the landlord was not concerned about the bankruptcy. He was looking to see if there were any evictions.

I think what really matters more than credit scores is staying out of Chexsystems and not having evictions, and I've always managed to do at least that.

https://www.thinkglink.com/2009/09/16/dave-ramsey-says-fico-credit-scores-are-irrelevant/

“For years I have been attacking the FICO score as a bogus measure of winning. All it measures is your interaction with debt. It is composed of 35% Payment History, 30% Amount of Debt 15% Length of Credit History, 10% Type of Debt, 10% Applying for new credit. So it really is the “I love debt” score because there is no way to have a great FICO score without getting into debt and staying in debt. If you make 1 million dollars per year and have 10 million dollars in the bank you can have a low FICO score simply because you don’t borrow.” So we tell people they can get a mortgage with a manual underwritten loan if they never borrow by paying their landlord early or on time and being on the job for two years. Keep in mind that the only loan Dave endorses is a 15 year mortgage."

That's not 100% accurate. You can have an 826 FICO and no debt. I've done it before as a transactor, but you really have to do a juggling act, and honestly, there's not much real world difference in getting stuff done between a 720 FICO and an 826 except it's much harder to get to 826.

His advice to get out of debt and stay out is correct. Once you are in debt, you struggle under it and may even go bankrupt, and then short of bankrupt (if you qualify), you may find that your creditors have what it takes to take what you have.

Just my two cents.

The best lesson about credit is to use as little as possible to get a score that isn't terrible and then stay out of debt. If you can make the banks pay you to use a credit card like a debit card and pay it off each month in full, then do that, but having too much available credit tempts you into a big trap.

[Save-n-Invest]

Ramsey built an empire convincing people that they cannot handle their own money without his blessing. To my mind it's just another cult. 

It's absolutely possible and not difficult to use credit wisely. I am debt free. Always have been with the exception of a ten year home mortgage that was retired a long time ago. MY FICO is only 823 so I am a few points short of whatever Ramsey is preaching. 

I will watch Ramsey's vids for entertainment sometimes. They are repititous so they get boring. If a person has enough smart to earn money they have enought to manage it. It's just a matter of making up your mind.

There can be extenuating circumstances but for the most part this is entirely doable. The main thing is don't give disbursement power to anyone who did not participate in the earning of the funds.

[Anonymous]

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@Save-n-Invest wrote:

Ramsey built an empire convincing people that they cannot handle their own money without his blessing. To my mind it's just another cult. 

It's absolutely possible and not difficult to use credit wisely. I am debt free. Always have been with the exception of a ten year home mortgage that was retired a long time ago. MY FICO is only 823 so I am a few points short of whatever Ramsey is preaching. 

I will watch Ramsey's vids for entertainment sometimes. They are repititous so they get boring. If a person has enough smart to earn money they have enought to manage it. It's just a matter of making up your mind.

There can be extenuating circumstances but for the most part this is entirely doable. The main thing is don't give disbursement power to anyone who did not participate in the earning of the funds.

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I agree to the extent that it's ridiculous to pay for his courses but some of what he says is good advice. For many people, FICO matters a lot the day they get a mortgage and not much other than that.

He did destroy a lot of the credibility he had with his position on the Coronavirus. There are rational and irrational fears and just blindly "not showing fear" is not always reasonable.

With regards to it bordering on a cult, he does push Fundamentalism and of course they have to put on some painted rust about not being afraid to die, but all intelligent creatures have a fear of death. It's one of the defining aspects of sentience.

[Save-n-Invest]

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@Anonymous wrote:

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@Save-n-Invest wrote:

Ramsey built an empire convincing people that they cannot handle their own money without his blessing. To my mind it's just another cult. 

It's absolutely possible and not difficult to use credit wisely. I am debt free. Always have been with the exception of a ten year home mortgage that was retired a long time ago. MY FICO is only 823 so I am a few points short of whatever Ramsey is preaching. 

I will watch Ramsey's vids for entertainment sometimes. They are repititous so they get boring. If a person has enough smart to earn money they have enought to manage it. It's just a matter of making up your mind.

There can be extenuating circumstances but for the most part this is entirely doable. The main thing is don't give disbursement power to anyone who did not participate in the earning of the funds.

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I agree to the extent that it's ridiculous to pay for his courses but some of what he says is good advice. For many people, FICO matters a lot the day they get a mortgage and not much other than that.

He did destroy a lot of the credibility he had with his position on the Coronavirus. There are rational and irrational fears and just blindly "not showing fear" is not always reasonable.

With regards to it bordering on a cult, he does push Fundamentalism and of course they have to put on some painted rust about not being afraid to die, but all intelligent creatures have a fear of death. It's one of the defining aspects of sentience.

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I did not hear Ramsey speak of Covid. My gut is he most likely discounted it in the die for the Dow sentiment. He does dispense some common sense advice. It's common sense and should not be necessary to be told disbursment cannot exceed revenue without going in the hole. 

I cannot offer any rebuttal to his advice to use actual money instead of waving around a phone you couldn't affort to buy. This is basic stuff. The old envelope system is a good tool for people just starting out. It's just not that complicated.

When a financial guru starts tossing religiousity around, put you wallet in your sock and run like the devil! His discounting of a fiduciary advisor is highly questionable. 

Ramsey has a vid on the everyday millionaire or some title like that. Most of that is pretty good. He stresses that that person is not into frivioulus spending. A million dollars is not that much money. It's nice to have but will not take you the distance in most situations.

If Ramsey ranting and raving helps someone, good for them. I doubt it's a plan for a person with good sense and self worth. 

It may be possible that Ramsey helps people who are easily swayed by people and institutions that make their living on others being in debt. His mantra that the borrower is slave to the lender is not off base for the average person. If you owe the bank a bazillion dollars that's a different story.