Well my daughter turned 18 a week ago, and is starting OSU in a month. So we figured we should get her credit history going. We applied for a first time credit card, for first year college students, and she got denied. WTH.
Don’t understand what happened, she makes $14,000/yr. So we would have understood maybe a $500/$750 limit but no. Our bank would give her one, but they needed $2,500 in a savings account that has to stay there, with a $50 annual fee. A personal loan of $1000, would also have to be backed by her checking account which has $12,000 in it, no way.
How does an 18yo get credit? How did you go about helping your kids get started without feeling like something shady is gonna happen.
I worked at a bank for over 25 years as a BR Manager and loan officer. With no credit history whatsoever, we would require a co-signor. Also, we were required to have the same criteria for all borrowers, and if we deviated, we had to answer to auditors and we better have a good reason.
Normally parents co-signed. We did create a loan similar to your "backed by checking account" idea, but it required a CD. WE would allow borrowing 90% od the CD amount, and charge 2% above the CD rate and if the loan was paid monthly, it created a monthly on-time payment on your report. After a certain amount of time, likely 6 months to a year, a good score would exist. I even went so far as to recommend 2 of this for the same person. WE did have minimum for both CD and loan amount, $2,000 loan IIRC.
Also, I am not certain, but generally we found that being an authorized user on a CC did not create anything positive on your score because the user had no responsivity or obligation for payment. It has been 3 years since i retired so my memory may be a bit off.
Living in the small, rural, farming community where our bank was, it created a bit of a problem, because parents raised their kids to work hard and never borrow money, for anything other than a house. When I suggested credit at 18, one parent told their son not to listen to me. THat same parent was very upset when their son couldn't get a home loan without a co-signor a few years later. Not saying the kids in my area were not worthy. IT wasn't unusual for a kid to have worked from age 13-14 as a farm laborer and have $20-$40K cash when they graduated and wanted to buy a house.
So, that is my experience. I can only assume, other banks had other underwriting guidelines.
