Turning 18 Help Starting Credit

[Subexistence]

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@Anonymous wrote:
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?

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I'm 18 and I have a Discover card so I could tell you about my experience. If I were to add him as a referral we would both get $50 lol. I got Discover secured card because I was declined the student card for having no history. Some people do end up getting the student card with no history so applying for student or secured card are both reasonable choices. I had a choice to put down $2500 as security deposit to get 2500 limit. Discover has really nice benefits like plane insuance, price check, etc. However Discover has one minor drawback because it isn't accepted everywhere. Your friend should plan to get other cards by 7 months. Also to get 700 by 19 requires he doesn't apply for too many cards and get too many inquiries. Although applying for cards decreases score in the short run, they can increase file thickness in the long run.

[Anonymous]

Subexistence - They applied for the Discover Student Card and we instantly approved for a $500 starting limit pending they provide documents requested (proof of acceptance/enrollment in college, proof of address, proof of citizenship (Ssn card) and proof of identity (driver license/birth certificate).

They lost their SSN card a few years ago and need a replacement that's the only thing holding up the app but the rep said it was approved for $500 once those documents are uploaded.

[Chris679]

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@Anonymous wrote:

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-Secure-technique/m-p/4506756

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.

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OP, your friend should NOT consider this technique.  Your friend is 18 years old and has no negative credit history at this time.  They do not need to pay interest on their own money to help their credit score.  How are we allowing someone on the forum to go around and pimp their companies loans out and pass it off as a good way to build credit?  You don't need to pay money to build up your credit.  It can be done for free with a credit card even if you have to start with a secured card.  You will get that money back unlike a secured loan where you are paying someone interest to hold on to your own money.  Or you could get an auto loan if you need a car.  In that case you are actually getting something for your money: a car.  Unlike a savings secured loan where you are getting nothing. 

[Anonymous]

Hi Chris.  You have raised this objection on another thread, and someone there reminded you that the total amount of interest that was paid is $9 over the entire course of the loan.  (Roughly $2 per year.)  You close by claiming that someone who uses the technique is getting "nothing."  The user is in fact getting a score boost of roughly 30 points for a $9 investment.  Some people find that worthwhile.  Cerainly it is woth "considering" which is all I said.

Where I think you and I are probably in firm agreement (and I hope we can land here) is that the OP and his friend may want to reassess the perceived need to get a very high as soon as possible.  Basically: what's the rush?  Is the OP sure he and his friend know why it is so darm important to have a high score so very fast?   Gradually adding a few cards is certainly a fine way to go at first.

But given the desire as described (the highest possible score in 12 months) I needed to make sure they knew all their options.

[Subexistence]

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@Anonymous wrote:
Subexistence - They applied for the Discover Student Card and we instantly approved for a $500 starting limit pending they provide documents requested (proof of acceptance/enrollment in college, proof of address, proof of citizenship (Ssn card) and proof of identity (driver license/birth certificate).

They lost their SSN card a few years ago and need a replacement that's the only thing holding up the app but the rep said it was approved for $500 once those documents are uploaded.

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Same thing happened with one of my friends who in his case didn't want to put out his SSN picture for upload. I called customer service and they said w2 form is acceptable.

https://www.irs.gov/pub/irs-pdf/fw2.pdf  so we ended up using w2 but he found out that he didn't need to upload the w2 and was approved. My friend ended up with a $5000 limit despite only being 18 and a half years old and we both got $50 for referral. If you want you can try uploading the w2 form but as far as I know, you have to have your social security number although you don't need the card. Oh yeah the w2 is 11 pages long but it's just repeats so you only need to fill out one page. Oh yeah another option the customer service provided was social security administration letter although I have no idea how one would obtain that. Hope this helps and best of luck!

[Anonymous]

@Chris
Are you serious or just jk with regard to the "cost" of adding a SSL to one's Credit profile.

I mean honestly the cost vs reward is actually LAUGHABLE, if one really understands what's going on...

The 'dumb' scoring model sees that loan as equal to an actual real live loan and basically allows for a profile to SKIP the line...For PENNIES!

If a person could actually purchase their way ahead in the line, it 100% absolutely would SALE for much much more than the 'cost' of a SSL.

The bank/CU is allowing one to "play" a video game, with their OWN money and get 'scoreboard' for it...Are you kidding?

Especially, considering that because of bank fees one 'might' pay the equivalent to 1% over a year anyway...We all know in today's climate in particular, the amount paid in % is booty on a few hundred bucks anyway... I can't think of a better use overall financially for a person in need of securing a low RISK profile that will pay dividends for and in one's entire life.

Again the value proposition isn't even close...Not close!
CCs
Auto loans
Auto insurance in many states
Home loans
Employment OOPS
Possible security clearances
Possible promotions
Too many reasons to pad scoring to be graded as a lower risk

But ppl "get" chasing airline miles smh😶

[Chris679]

I will admit that I did not at first notice they were advocating paying the loan down to 90% or so right away. This makes the cost of the loan pretty insignificant like you say. I am still not super excited about advising young people like OP to take out loans online just to raise a credit score that is already ok to begin with. If it were someone that was pretty credit savy and they really needed that potential score boost I suppose it could be worth it.

[Chris679]

Full disclosure I will admit that a SSL is pretty much what directly lead to me educating myself about credit and lead me here. I wanted a car loan in Feb 2008 but my credit was crap. My banks idea of how to "help" me build my credit back was to take some of my money, borrow it back to me and charge me interest on it! I took my business elsewhere and the rest is history.

[Anonymous]

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@Chris679 wrote:
I will admit that I did not at first notice they were advocating paying the loan down to 90% or so right away. This makes the cost of the loan pretty insignificant like you say. I am still not super excited about advising young people like OP to take out loans online just to raise a credit score that is already ok to begin with. If it were someone that was pretty credit savy and they really needed that potential score boost I suppose it could be worth it.

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I am not super excited about young people opening multiple credit cards either, which is a vastly greater danger for them, given the problem most 18 year olds have with impulse control.  In a word, I am not crazy about the OP's general desire, which is to move a credit score as fast as possible in the first year.  But I kinda had to work with what I was given.  With the question as given, the best strategy is to open 1 card, then open an SS loan to get an additional (and substantial) boost, then open a couple more cards.

If it were a young friend of mine and he really wanted my advice as to how to do all this while protecting him from the risk of damaging his credit, I'd explain that there are really only two risks: accidental late payments and impulsive spending.  So I'd advise him to set up autopay on all his cards and also a small recurring charge on one (e.g. Netflix) and then pull them out once every six months to buy groceries or gas.  Otherwise keep them hidden away from sight and use his debit card for actual purchases.

[wa3more]

i agree with creditguy on young people getting credit cards just....to get cards or get to a credit score, which is really a debt score.

As a parent and person with a finance background, I would want to see other steps included as this is a larger more global process :

related to the OP :

- do you have a checking and savings account ?

-do you have any money in the savings and do you have the disipline to save anything ?

-do you find yourself overspending often ?

what i see is high school/college kids getting credit cards with no or minimal income. I would say do not be a slave to a credit score and look at credit cards with caution.

This 18-25 agre group is one of, or is, the number 1 group claiming BK. Most people use credit as an extension on income and then end up in real trouble.

At 18, i'm not sure what importance a credit score will even have other than to get more credit.