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What age to get credit established?

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1-Jul-09 4:47 pm

 This probably seems crazy but what age can I add my children as "authorized signers" to use my credit card to get their credit established?

I want my kids to NEVER  use credit cards, but it's really hard to get credit, without credit cards... so  I was thinking if I established it for them when they are young, without them knowing, it'll make their life a lot easier when they want their first car and house.

I will not be paying for their first car or college, etc, they will have a job (even just working for dad to pay their bills).. but I would like them not to be paying up the ying yang for interest.

Thoughts?




 

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1-Jul-09 7:16 pm

 Okay... this is going to make me seem CRAZY!... but... you don't NEED credit.  Ever.   The only thing you need credit for is to borrow money.  The only thing people think you "need" credit for is a house and car.  If you save up, and start with a crappy car, you don't need to borrow for it.  As for buying a house:  All you really need is a good down payment, and someone who is a good underwriter. 

My DH and I have been struggling to get out of debt.  We are sooo close.  After the car is paid off, we will continue to put "car payments" into saving, so when it's time to replace our car, we will pay cash.  It will be sooo much nicer to pay for a car with money that was earning interest in a savings account (or mutual fund) than paying interest on a loan.

I know it doesn't sound normal.. but if normal is a giant mortgage, and forever having a car payment, then we don't want to be normal :)   I really suggest checking out Dave Ramsey.  His class was AMAZING and taught us how to take control of money.  My DH and I are actually really excited to raise our kids debt free, and teach them to do the same. 


ps.  I'm sorry if this comes across as preachy.  I don't mean to be... the whole subject of credit cards/debt just gets me riled up.  In the end, you are the child's parent and ultimately know what is best for him/her  :D

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1-Jul-09 7:38 pm

Well you need credit for more than just buying a car or house.  Some people will check your credit to get an apartment or you need credit to get a cell phone on your own.  Credit is used for alot of things besides borrowing money.  With that said of course everyone knows you should just use cash but to answer the OP's question I think you should do this whenever they are eligible.  My dad put my name on a credit card when I was in high school but he never used it and I never used it either.  I was able to have 14 years of excellent credit by the time we bought our first house and it was great having that.  I was also able to get a cell phone on my own unlike my little brother who had to have my parents sign for it because he just flat out didn't have any credit at all.  He didn't have bad credit just no credit.  Oh and for my husband to establish good credit after he graduated from high school and joined the military was to take out a small loan and pay it off.  Otherwise he also had zero credit.  Establishing credit without debt is a fantastic idea for your kids!


KK

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1-Jul-09 8:17 pm
We are the "crazy" people like Decemberbaby! We don't have car payments, just save up our money and buy used cars. You can buy a house without established credit. Something like a cell phone contract or utility payments also help establish credit enough to buy a house. If more of us had saved up big down payments before buying our houses, I firmly believe we would not be facing as many foreclosures. Credit will bite you in the ass sooner or later. I don't think this is a good idea to do for your kids because when they are adults, they'll already have "established" credit and the temptation is so great when you go off to college and there's those credit card companies offering a free teddy bear just for filling out an application, then all the sudden your kids are the ones getting approved, and they leave college with lots of debt. I think you would be doing your kids a favor by opening a savings account for them and teaching them how to save a little out of every "paycheck" and how to budget and spend money effectively without debt.

I don't mean to sound negative, because I realize that you are being really proactive by asking this and you care about your kids, and I know well-meaning people can differ in opinions. I just have a unique perspective on finances due to having had many friends and family members recently facing foreclosure and bankruptcy. It's just so tough...

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1-Jul-09 8:28 pm
 I don't have any credit at all.  My name is on literally no debt! (All the debt has been brought in by my hubby.) I have my own cell phone (that was in only my name before I met my now DH).  I just had to pay a "deposit" that I got back after paying on time for a year.  It was obnoxious, but I did it :)    I also got my apartment before DH with no credit.  My checks from work showed I made enough, lack of debt, and letters of recommendation got me my first apartment.  My second I got because I made sure to get a letter from my previous landlord stating that I payed in full on time, every time.  You don't NEED credit. 


To answer OP's question though:  I don't think there is a legal limit on the age.  Most credit card companies don't have an age requirement, as long as the account was originally opened by someone over 18. (Others suggest co-signing a card for your kid, or doing a small loan).  Just please, really think about, and be careful!! :)

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1-Jul-09 8:51 pm

 I guess I just don't see what the problem with establishing good credit.  It is not like she is going into debt to give them credit she just wants to establish credit.  I know you don't think you have credit but if you were to pull your credit score you would have credit score which means you have credit.  Having credit doesn't mean you debt.  I don't have any debt in my name either but I have excellent credit.  I know you don't need credit but what is wrong with having credit and zero debt?


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1-Jul-09 9:11 pm

Michaela:

 I guess I just don't see what the problem with establishing good credit.  It is not like she is going into debt to give them credit she just wants to establish credit.  I know you don't think you have credit but if you were to pull your credit score you would have credit score which means you have credit.  Having credit doesn't mean you debt.  I don't have any debt in my name either but I have excellent credit.  I know you don't need credit but what is wrong with having credit and zero debt?


 First: I think it's awesome that you have good credit, and zero debt!!  Not many can actually say that.  Most have car loans, and credit cards, gas cards, etc.  That's debt.  And is sucks.

Second:  I think it's great that the OP is already thinking of ways to help her kids in the future. 

My only problem is when people assume that credit is a needed thing.  As Dave Ramsey says: all a FICO score is is an "I love debt score"  It consists of:  Payment history - 35%     Amounts owed - 30%     Length of credit history - 15%   New credit - 10%  Types of credit used - 10%

In order to establish credit, you have to borrow at some point.  It's just my personal belief, but I really like the idea that (once my husbands car loan is paid off.. blah.) all our remaining money will be earning us interest in savings and mutuals funds rather than us having to pay interest.   A good credit score is needed to borrow - and that is something my family is no longer going to do.

 


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1-Jul-09 9:16 pm

my dh parents had started his credict at 16.  I had friends that tried to live credit free and after 3 year they couldnt.  So they got a gas card and only used that.  This and paying there bills on time (keep all the bills for a year), got them the credit they needed to buy a house.  A down payment is not enough to buy a house, not in this day and age.

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1-Jul-09 9:26 pm

 Oh my husband has debt meaning a mortgage and a car but that is because we put things in his name as I don't have an income.  I totally agree that everyone should live debt free but that is next to impossible for most people to do.  I love the people that buy Dave Ramsey's book on their credit cards LOL!  I also wanted to point out that using credit cards is not a bad thing either if you can pay it off in full every month.  There are many free plane tickets or products or points that you can get from using them the key is to pay them off.  Most people can't do that either though.  I think going to the extreme is one thing and being responsible is also another thing.  People just need to find the balance and what works for them.


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1-Jul-09 9:45 pm

 Lols - I work in a bookstore, and people use credit cards to buy his books all the time!!   Good start guys! :P  I don't think using credit cards is bad for everyone... unfortunately most people don't pay it off each month, and that's when it gets bad.  I think I get so riled up because I've never had debt, and I married into it, and it's hard.  It kind of makes me hate those little plastic cards.   I totally agree about finding balance though, it's hard but it is what's important.  (I guess on this subject, I'm just one of the extreme people! lols)

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1-Jul-09 10:05 pm
decemberbaby:

 Lols - I work in a bookstore, and people use credit cards to buy his books all the time!!   Good start guys! :P  I don't think using credit cards is bad for everyone... unfortunately most people don't pay it off each month, and that's when it gets bad.  I think I get so riled up because I've never had debt, and I married into it, and it's hard.  It kind of makes me hate those little plastic cards.   I totally agree about finding balance though, it's hard but it is what's important.  (I guess on this subject, I'm just one of the extreme people! lols)

Me too! It's important to note that debt does cause a lot of problems in a marriage. And, Tamara is right, it's hard to buy a house without credit; however, as I noted earlier you can build credit as an adult by having a cell phone contract, paying your utility bills on time, and even with the overdraft protection that comes with most checking accounts. Michaela is right in that credit cards do offer nice perks for their customers like free rewards and such. Unfortunately, unless you're paying your bills off every month, you are paying many times the cost of those rewards by the time you earn them, in interest to the company. Nothing is free! Also, many debit cards offer similar programs, without incurring any interest charges.

The difference between credit and debt is an important one. Establishing credit at a young age may not be fatal to some, but to others, as soon as they're 18 the temptation is too great if they already have credit established, to spend beyond their means believing their incomes will increase over time and they'll be fine as long as they can afford the monthly payments. I think it's problematic for parents to lead their children into that kind of temptation, and personally wouldn't support that any more than I would letting your kids drink alcohol at home parties. I don't have any problem with alcohol for adults, and most learn to use it in moderation, but obviously it does cause problems for some, and you have no way of knowing which category your kids will fall into until it's too late. I wouldn't want my kids entering their adult lives with strikes against them already. JMO

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1-Jul-09 10:48 pm

I guess I was raises to know that you always pay of the Credit card.  you never ever pay just the interest.  I cant even imagine not paying it off every month.  But I was also taught you only pay cash for cars- no debt with cars.  Which means we have 3 broken cars lol.  But our only debt is our house.  So we had credit as teens but we never let it go a month

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2-Jul-09 6:14 pm

Ok.. first.. I'm a HUGE Dave Ramsey fan! I've read all his books... but don't you want your children to buy a house one day? Or are you going to make them pay rent (pay someone else's mortgage for them) or save up $500,000 to pay cash?  That's really my only reason!

If you read my first post.. my children will never know it's there and really never be able to spend it and will never be given a card to use. We pay off our balance... I just want them to be able to piggyback on our good credit... might as well.  I think that's a much better option than parents who pay for their kids college, etc...  I'm giving them a head start in a way that will benefit them and still keep them responsible with money and payments.  This way I will NOT have to co-sign for anything for them.  And it's not like I won't be teaching them about budgeting, only paying cash, etc as they are growing up. I will not kick them out of the house when they are 18 and say here's a fatty credit card, have fun... I mean seriously???

Anyway, the youngest I've heard is 14. But I've also heard of credit fraud taken from hospitals and babies credit being ruined starting at birth... so who knows.




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7-Jul-09 11:29 pm

You REALLY need credit nowadays. Even some jobs require credit now. Their logic behind this is your credit can determine the responsibility you take into your personal affairs and will accurately depict your professional responsibility as well. It's used for other things as well, but that's basically the bottom line as far as jobs go. Even though DH is active duty and our rent comes right off the top of his paycheck, we still had to be approved before they would rent to us. It's almost ridiculous what you need credit for now.

Anyways, I wouldn't recommend credit cards. At the age of 18, your children should be able to put money into a CD at a local bank and "borrow" against it. It's a secured installment loan and will allow them to build their credit at typically two percent above the CD rate. They should also be able to do this by themselves without a co-signer.

Good luck!

EDIT: The youngest ANYONE can begin building their credit is at the age of 18. Credit cannot be reported legally for someone that is under the age of 18. You should be able to find more information about this through the Federal Trade Commission.

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9-Jul-09 10:30 am

Epiicurean:
You REALLY need credit nowadays. Even some jobs require credit now.
 

ITA. My DH has worked in finance (and so have I) and credit score is a part of the app. process. They don't want you having access to other people's money if you can't manage your own!

 I actually had no idea that being an authorized user would build credit for that person. I don't know how I didn't know this, but I thought you had to be a cardholder (primary or co-) in order for it to affect your credit score. 

That being said, I would probably give my kids a credit card when they go to college. I would hate for them to be stuck on the side of the road w/a flat tire or something and not be able to make it home. I also don't feel it's particularly wise or safe to carry hundreds of dollars of cash in one's pocket and I'd much rather have a CC that I (or my kids) can use for emergencies.

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