Turning 18 Help Starting Credit

[Anonymous]

Hi;

So I have a friend turning 18 next week and I want to make sure they get to 700 before they're 19 so what's the best way to do this?

I was thinking app for Discover because they're the most new file friendly use it and pay it for 3 months keeping under 10% UT. Then something else but I don't know where to go from there thoughts?

[Anonymous]

Once your friend has a CC, he should keep it reporting < 8% (not 10%).  The penalties for utilization begin at 8.99%.  Simplest approach is for him to pay the card down to $5 a few days before the statement prints.  And then make a followup payment a few days after it prints.  And always use it a little bit each month.

At month 3 or 4 your friend should consider the SS loan technique.  You only need to read the first 2-3 posts to find out all you need to know about it:

http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Adding-an-installment-loan-the-Share-Secu...

After your friend has a FICO score (month 7) he could consider adding another card.  He should then make sure one card always reports $0 with the other card reporting a small balance.  His score should be above 700 by the age of 19 if he does all that.

[newhis]

The 'best' way for someone turning 18 to have a 700 score is to be added on a few of the parent's cards. I added my DD to a few new cards when she was 16, several months after her 18th birthday she applied for Amex BCE, her score is mid 700s. Pretty high SL for her income.

I can tell you that anyone that start without history (any age) could be around 800 score in as little as 2 years. DW and I started our credit history in USA less than 3 years ago. We got a couple of cards, she got a couple more before a FICO score could generate and when finally we got our first TU FICO it was 720 for her and 731 for me. At this point we didn't know about the secured loan technique.

With a complete clean profile, follow CreditGuyInDixie advice and I'm sure that by 19 your friend could be near 750. Good luck.

[Anonymous]

It may be worthwhile for your friend to scoop up a couple of secured cards (say 3) that have the potential to be upgraded or product changed to unsecured versions.  I never went down the secured card route when I was 18, so I can't speak much about it.  I do think it would be good to get multiple accounts going right away so that in a year or two of time his file is thicker, and he's also be able to let 1 card report a small balance with the other 2 reporting zero balances which would maximize FICO scoring under the utilization third.  Also in planning for the future, say 7 or 8 years from now when he's in his mid 20's and decides to apply for additional credit lines it would be nice to have 3 "oldest" accounts factoring into AAoA rather than just 1.  I don't think getting to 700 in a year would be very difficult at all to be honest as many have had success in doing so, even inside of a year.  The two biggest factors are on time payments and keeping utilization at 8% or less (as CGID suggested already) as these two factors combined comprise 2/3 of your score that you directly control... the final third you can't do much about other than giving your file time to age and not applying for any credit outside of the few (3 or so) original accounts that you open up.

[Anonymous]

Okay thank you for the advice. When I was 18 I never really listened to the banker when he told me buy something small and pay it each month. I was 18 and my first app I got a $1,500 SL at Wells Fargo. I paid if each month for 5 months then a $32 international charge appeared, I didn't even have a passport so I reported it. They told me I had to prove I want in France on this day they wanted receipts and this and that all over a $32 charge. I said I didn't have all these records they wanted just that I was in the US based on charges the day before, the day of and the day after but they didn't budge.

That's when I just let it go I never paid that or any other of the charges because I felt they were being unfair and rude. I didn't have anyone who could have really guided me into the world of credit. And I've been paying for that for years in March 2018 I'll be eligible for TU early exclusion that will be my last collection to come off my reports. My score was low 500's for years I've been rebuilding and just this week barely got to 660. But If I could go back I would in a heartbeat and just pay it.

So that's why I want to make sure everything goes perfectly so that my friend never needs to stress about collections or anything like that. I'll talk to them and see if they can afford to put up for a few Secured Cards. The only one I know of that graduates is Discover, Capital One no longer does it is there any others you'd recommend?

[joltdude]

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@newhis wrote:

The 'best' way for someone turning 18 to have a 700 score is to be added on a few of the parent's cards. I added my DD to a few new cards when she was 16, several months after her 18th birthday she applied for Amex BCE, her score is mid 700s. Pretty high SL for her income.

I can tell you that anyone that start without history (any age) could be around 800 score in as little as 2 years. DW and I started our credit history in USA less than 3 years ago. We got a couple of cards, she got a couple more before a FICO score could generate and when finally we got our first TU FICO it was 720 for her and 731 for me. At this point we didn't know about the secured loan technique.

With a complete clean profile, follow CreditGuyInDixie advice and I'm sure that by 19 your friend could be near 750. Good luck.

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I tried.. and i got to only 755 in 2 years... from no history....

But I wasn't an AU, but did have a friendly CU, when i eventually ended up with a card, a SSL and a PLOC..

Just a datapoint..

So if an AU is not an option, you still can do it. but youd probably have to go the secured card route instead...

Secured Card+ SSL + Time  will get you to in the high 750s.. I still think 800s are stalled by lack of aged accounts.. Thats where i am at though. 

AU+Secured Card+SSL+Time ... will probably make it stronger ... having a few more TL to age at the same time... Also AUs are treated differently by different card issuers and some cards it doesnt help as much and others dont consider it in their scoring...

[newhis]

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@joltdude wrote:

I tried.. and i got to only 755 in 2 years... from no history....

But I wasn't an AU, but did have a friendly CU, when i eventually ended up with a card, a SSL and a PLOC..

Just a datapoint..

So if an AU is not an option, you still can do it. but youd probably have to go the secured card route instead...

Secured Card+ SSL + Time  will get you to in the high 750s.. I still think 800s are stalled by lack of aged accounts.. Thats where i am at though. 

AU+Secured Card+SSL+Time ... will probably make it stronger ... having a few more TL to age at the same time... Also AUs are treated differently by different card issuers and some cards it doesnt help as much and others dont consider it in their scoring...

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Sorry I guess more information was needed. I think to reach higher scores we need to garden. DW reached 750 in 16 months, kept applying every now and then and the score didn't grow. She is in the garden (13 months now) and she is 785-800 before her AoOA reached 3 years. She has a couple AU cards younger than her oldest account, so they don't help. Credit cards and auto loan at 70% balance/original.

I think that when she app for another card or 2 her score will drop to 750-770 depending on her util and number of cards reporting balance.

Also, every profile is different, there is no 'only way' to get a high score. I believe if you get 3 cards and secured loan when you start your history (in the first 6-9 months or so) and then garden for 2 years, you will get pretty good scores.

[beastykato]

I'm just gonna share what I did when I was 18.  I got an account at a local credit union and after a few months of working and saving up some money in the account I asked them for a credit card.  They didn't make me secure any money for collateral I just went into the credit union and spoke to the manager.  I told him what I wanted to do and that I just wanted a card with a $200 limit.  I did eventually close that card years later before I knew about it's value for the average age of accounts.  

I wouldn't recommend more than one card and definitely not more than 2-3 at 18.  You're at point in your life where even if you were smart like me, and it seems you are, you still have hormones and impulses.  You might see something you just gotta have and buy it at that age, hell even at my age (29).  

Keep it simple and stay on top of the payments and it will climb quickly!  Maybe get a small auto loan if purchasing a first vehicle at that age. 

[Anonymous]

Thanks for the share

I've heard Discover is the best for new files so trying there then let it build. You think someone could get an auto loan at 18?

[Anonymous]

Getting an auto loan is a good idea for one and only reason:

       Because you need a car and can't afford to pay for it in full with cash you have on hand.

It is a terrible thing to do if a person is doing it because he thinks it will improve his credit score.

On the other hand, getting an installment loan can be a very wise score-improving move, if the person has no open loans.  It's just that there's no reason for it to be an auto loan.  As I indicated earlier in my first response, the correct installment loan strategy would be the Share Secure loan technique.  You only need to read the first 2-3 posts at the link below to find out all you need to know about it:

http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Adding-an-installment-loan-the-Share-Secu...