How can a high school student establish credit? I’m thinking a credit card would work but would a debit card work just as well?
I don’t know for certain, but I don’t think a debit card would help you establish credit. Debit cards are tied to a bank account of some sort, which already has the funds available. You are being extended no credit in order to use it. Establishing credit has more to do with showing you are trustworthy enough to have someone make you a short-term loan and you pay it back on time.
As far as I can tell, you’re SOL if you’re a high school student and trying to build credit. You’ll have a sort of Catch-22 situation where nobody will give you any credit, because you have no credit history. I had this situation until my junior year of college when I finally got a credit card.
From what I saw on my credit report, the things that count are debts that you repay in full, and without interruptions in payment. The idea is that the lending institutions are trying to assess their risk in lending you money. The more reliable you are in paying things off that you owe, the higher the credit rating.
As far as I can tell, they don’t care about bills that you haven’t borrowed money on- if you’re a little late with your power bill or cell phone bill, that doesn’t seem to go on your credit report, or at least it never did on mine. Now if you completely skip out on it, that would probably go on there.
Based on my credit report:
Things that count:
[ul]
[li]credit cards[/li][li]gym contracts[/li][li]actual loans[/li][li]car notes[/li][/ul]
Things that don’t count:
[ul]
[li]phone bills[/li][li]non-contract gym memberships[/li][li]debit cards[/li][li]pre-paid cards of any type[/li][/ul]
The answers given above are all correct. Most adults have no idea how credit ratings work in my experience. I had credit in high school because I had a car loan that my grandmother co-signed with me. Do you really need credit now? As soon as you step foot on a college campus, you will probably have to beat the firm credit card offers away. Be careful though, many college students get in big trouble and end up in debt with bad credit very quickly.
Sorry for the hijack. My 14 year old daughter starting working this Summer. Since starting her job she has received dozens of credit card offers from Crapital One. Is this normal?
I once interviewed with a Capitol One subsidiary. In the interview they claimed that they sent out 1% of the entire U.S. mail volume. They thought that is impressive. I guess that it is…in a pathetic sort of way.
The only way a high school student will wind up with positive tradelines is if someone co-signs with them on something OR [sometimes works, sometimes doesn’t] if an adult someone adds them to a line of credit that the adult someone has.
I knew a lady who did the latter for her son… she stuck him on her Amex card and one Visa card and all of a sudden he was 18 years old with a credit card in good standing for 7 years on his report. He was 18 with a 725 FICO score.
PS- No way in heck I’d let any kid of mine on any credit line I had open, unless I was defacto incompetent and letting my adult son or daughter handle my finances after I was incapacitated… and probably not even then… but it worked out for my one associate.