Kids! They always know more than their parents at eighteen don’t they?
My son has it in his mind that he needs to build his credit and his solution is to get a cell phone.
I have told him that cell phone companies do not report good payment, but they will quickly report bad payments to the credit reporting companies.
Since I don’t know anything, I thought you all might be able to clear up my misconceptions.
Why not let him educate himself?
He’s made a claim: “A cell phone can build a credit rating.” Tell him he’s got a month to research this claim and submit a report. He’s got to list sources and find evidence to support his claim.
If he successfully supports it, he can get a cell phone. If not, too bad.
I was gonna make some kind of big argument, but on second thought, Legomancer is right. Send the punk to the library.
[sub](By the way, I strongly doubt that a good credit rating is why he wants a cell phone.)[/sub]
Well, cell phone accounts do show up on credit reports, but they don’t provide a rating. There is no way that a cell phone account could build credit of any kind. If that was all he had on his credit, he wouldn’t have any score at all.
If your son wants to build his credit, arrange for him to get a credit card with a low limit, and make sure you’re also on the account, so in case the creditors want to raise the limit, you have the right to tell them to keep it low.
FTR, I am a mortgage loan processor and have pulled thousands of credit reports.
If he wants a cell phone, he can get a pre-paid Tracfone- http://www.tracfone.com/home_page.jsp
At least then he won’t get sucked into the cell phone bill mess or contracts.
If he wants to build credit, I’m sure there’s a better way.
Yup, that was my first suggestion. But remember when you were 18? You know EVERYTHING and everyone else is wrong, especially parents.
To his credit, it is his own hard-earned money and he is 18 after all and entitled to make his own mistakes.
Ironically, cell phones don’t work here well at all. It is very mountainous and there is only one cell phone tower. You quickly learn which mountains you have to park on top of to get any kind of signal. I know, I sucked into one as a business tool when they first came into the area and finally had to resort to a 10 pound bag phone, so much for portable convenience!
Tell him that it is fine to get the cell phone and ask him to call you on it when he gets settled in his new apartment.
Being pretty young and not having a credit rating myself, i also thought getting a cell phone would build my credit… i was getting it anyway, but i thought ‘hey, if this helps my credit too then great!’ But when I signed up i had to put it in my brother’s name (he has credit and otherwise i’d have to pay a $150 deposit) and later switch the account into my name. When I went to have this done I’d been paying every singe bill for almost a year and, since apparently i still had no credit, the $150 deposit was still required and the only thing i could really do was put my name as the user of the phone, but his name is still the head of the account. The nice lady at the cell phone company said if i countinued to pay my bills on time for 6 months then I’d establish my credit with them (them being the cell phone company) so i guess that’s when i realized i wasn’t really establishing any credit that would be recognized anywhere else besides with them.
so Kyla, if i want to build my credit the only way is by getting a credit card? i really don’t want to get the wrong card and end up paying a LOT of interest, annual fees, etc etc. So is a credit card the only way to go?
How about a store charge card for a ladies only store? He could use it for Mother’s Day, birthdays and Christmas – but wouldn’t be so tempted to over-spend.
Pretty much. Or a loan, like for a car. You can also get a charge card for a store, but I would recommend it, as interest rates are much higher than for credit cards.
I don’t know how old you are, maybelz, but if you’re 18 or in college, don’t worry about it. You’re better off without the temptation of a credit card. I got my first credit card when I was a senior in college and almost never used it, I was so afraid of screwing things up. But apparently I am in the minority - I constantly hear stories of college students graduating with thousands of dollars in credit debt.
Also, despite getting a somewhat late jump on my credit history, I have great credit. The first and best rule is: always pay on time. If you can’t pay the whole balance, it’s okay (it’s actually better to carry over a balance). If you miss the deadline and have to pay a late charge, it’s okay. But never ever ever miss a payment for an entire 30-day cycle. Even if you can only pay the minimum. One 30-day late can drop your credit score significantly.