I should point out that I’m not referring to myself: if nothing else, I doubled that age some time back. The subject is my daughter (the Elder Ottlet), who has been attempting to establish credit and finds herself in a position similar to a person trying to land a first job but being rejected because of no experience. The latest instance — trying to buy tires — left her so obviously frustrated that I asked her if it was okay to run the issue past the Dope, and she agreed.
The problem isn’t income: she’s a regional manager for a retail services company and while I don’t know the details, I’m guessing she makes approximately what I did during my IT career. And while she has a couple of hiccups in her past, they were over a decade ago. My understanding is that the issue isn’t a bad credit history: it’s that she effectively has no credit history. She did enroll in a program at her bank where she made regular transfers to a savings account which would eventually be used to secure a credit card — but the bank terminated the program just before she would have gotten the card. More frustration.
I am aware that there are used car dealers, furniture stores &c that will “finance anybody!!!” But aside from the fact that buying something you don’t want or need just to get credit is bad economy, I’m not sure whether such “financing” really counts. Plus which, if I stood by while she got involved with a quasi-loan shark my father’s moldering corpse would rise from his crypt and whup me mightily about the head and shoulders. So there has to be a better way, and I’m betting that some of the “smartest, hippest people on the planet” know what it is. Any and all insights/suggestions/recommendations welcome.
My suggestion would be to start by exploring various credit card options, some of which are much more lenient than others, though as long as she has a steady income and no negative credit history, I would think the Elder Ottlet would qualify for almost any basic card. Credit card companies are among the most fastidious about reporting credit history, both good and bad, so as long as she pays on time (and preferably in full) that would be a good start to her credit history. Also, with a good record, credit card issuers will gradually increase credit limits (some much more than others) and available credit is another good indicator on the credit record.
Got it in one. She needs to get at least one credit card. Back in the day anyone could get a credit card at Macy’s and start their credit history. Since they shop there anyway, paying using the credit card, and paying that card off each month, was a great way to get a credit history. I believe they also got a discount and notice of upcoming sales events.
Of course, nowadays there are dozens of card companies out there with some offering cashback awards, points, or miles that can be used for vacations. Assuming you can pay it off every month there’s really no reason to write a check or pay cash for anything these days except rent.
This and this. All you need for a secured credit card is some cash up front. Then you at least exist on a credit report. Use it regularly and responsibly, and after a year or so she’ll qualify for other types of credit. Apply for those as well, and make the agreed payments.
Some lenders offer specific products for borrowers with bad credit or no credit. These can also be an avenue worth pursuing, but read the fine print and beware of exploding interest rates.
Do you have credit cards? Good credit? One option would be to make her an authorized user on one or more of your cards. She would then absorb your credit history (for most cards - make sure that you’re using one that reports the credit of authorized users). Once her credit is established, she can get her own cards and then be removed as an authorized user on yours.
This is how I got my first credit, at about age 32 or so. I had to ask around at several banks to find one that offered this (before the days when you could search on-line – this was in 1984). If you have enough money that you can maintain a checking-account balance of a thousand dollars or so, you can do this.
Right before I bought my house about 12 years ago, my credit history was solely some student loans. My buyer’s agent recommended getting credit card, not just to build credit, but for house emergencies. So I went to Macy’s, picked out a few hundred in clothes and shoes (I’d recently been promoted to management and needed to update my wardrobe) and applied for a Macy’s American Express card. Just qualifying for the card got me, I think, 20% off the purchase and I saw a bump in my credit. I later applied for another card that I use a lot more and I now use the Macy’s card mostly for gas for the car and for maintaining credit. So my credit report will have a mortgage, a Macy’s card, a general purpose card and that’s it and I’m in the low 800s and rising.
This reminds us of another important point: Be sure to teach the Elder Ottlet (and any Younger Ottlets in due time) about Credit Reports, and how to get your three free reports (one from each of the major bureaus) once each year.
Tip: You can order them on-line or by mail. As far as I’ve been able to tell, if you order on-line, you can only get the report on-line. But by ordering via a snail-mailed paper application, you get your report on paper. I do it that way, so I’ve got paper manila folder with a thick stack of reports for the last several years.
I printed out a copy of the application, filled in all the parts that don’t change (name, address, social security number, birthday and such), then made a whole stack of copies of that. So every 3 or 4 months I just take one of those, fill in a few remaining details, and send it off.
Getting the report back in the mail typically takes about 3 weeks from the day I mail it.
She should also have the option of opening a checking or savings account at a credit union and be qualified for one of their credit cards.
Caveat that any card she gets is going to have an absolutely abysmal interest rate so paying off every month will be an absolute must. The credit union option may give her the best rate of all the bad options.
I’d think this is the answer; credit is like gardening; you have to cultivate it, and a basic credit card is one of the best seeds.
One thing she might consider is going to the local college and seeing what sort of applications are on bulletin boards, etc… Those are usually very basic cards aimed at college students without any credit.
You are trying to make this logical. It isn’t. People who can’t get approved to pay $1200 per month to buy a house then have to pay $2000 per month to rent an apartment. Welcome to the USA. The car companies have an interest in making sure that credit is available, because it allows them to price cars near most consumer’s annual salary.
Anyway, to answer the OP, SpoilerVirgin gave you the very best answer. Include her on one of your oldest accounts, and wait a month or two. She will then have a years-long credit history matching the age of your account, even if you opened it before she was born. It’s just one more way that wealth is reserved for the children of the wealthy.
You don’t have to give her a card, or even make the account available to her in any way. They will send you a card and you can just keep it.
Right now - from a credit report perspective - she looks like someone who has changed their name in order to escape creditors. The system just doesn’t accept people who pay their way without the service. She’s a ghost to them. You can give her a history.
I see a lot of Gen Z people make this argument on Facebook. I can’t help but wonder if basic finances aren’t taught in high school any more because this is in fact very logical from the perspective of a bank – or a landlord, for that matter. Renting an apartment or a house requires, at most, a one year commitment and if a renter fails to pay the rent the landlord can evict them with little fuss and immediately rent the dwelling to another person. If a homeowner defaults on their mortgage the foreclosure process is much more onerous, time consuming, and if successful leaves the bank with a piece of property they have no interest in owning and that has no guarantee of selling quickly. This is one of the principal reasons that banks require a) an appraisal to be performed before closing and b) PMI if the LTV ratio is >80%. Providing a mortgage to a client is a form of investment for a bank: they loan out the money, they get their money plus a bunch of interest in return, but only if the homeowner pays the monthly mortgage payment as promised.
A lot of the Gen Z whining on social media seems to ignore the fact that the generations before them (the ones they claim had it so easy) were usually required to have 20% of a home price as a down payment before even approaching a bank for a loan. Today the norm is closer to 9%.
Nope, it’s free weekly now, has been since early 2020. The website is annualcreditreport.com, not "free"creditreport or anything like that. They don’t give you scores for free, but reports. Many credit card companies also offer a free score from one bureau updated regularly, while the big 3 will give it free through their websites if you sign up and ignore the frequent requests for a premium upgrade. Important to note there’s not “one” credit report even within a single bureau, each method may give different ones and wildly different scores.
FWIW I’ve found it harder to get stores to extend credit than actual credit card companies. I think I’m 2/4 for store cards I’ve requested (one even after years of credit history) and 10/10 or I don’t know how many for credit cards.
I’m not sure if too many cards share credit history for authorized users anymore. We looked into this with my daughter and didn’t find any. To have the credit history reported, they had to be a joint applicant. The difference is that in the first case, the primary applicant is responsible for all charges by authorized users. With a joint account, both card holders are responsible for charges. If a card holder is not legally responsible for the charges, then they don’t get credit history reported.
We got a secured card for her through Discover. It was no trouble at all other than putting up some money at first. Use it regularly to create credit history. After a year or two they refunded the secure payment and it became a normal Discover card.
A way to set-and-forget building a credit history is setup autopay have some monthly charges like Netflix or SDMB subscriptions go to the card. This way there regular, predictable monthly activity on the card that will build credit history over time. Keep in mind that the initial deposit is not supposed to pay the monthly charges. You have to treat it like a normal CC where you pay it off yourself. If you don’t make monthly payments they will draw from the deposit, but that would ding your credit report as a late payment.
But can you order a printed copy of your report on-line? Last time I looked (maybe 6 months ago), couldn’t find it. The printed request form I linked to, will get you a printed report.
Yes it gets you the same, with the caveat that often you’ll get a vague “can’t help you, send us the form by mail” so the form is needed. You get a page with everything that can be printed or to PDF. And I can’t figure out how to fix the problem, and sometimes it works and sometimes it doesn’t. One even has my address wrong but it appears right everywhere else on their website. Experian seems to be the least bad of the 3 in website design.