what is the best way for a young person to establish good credit?

bigkat

Well-known member
do you start with getting a credit card and paying off the balance every month? what is a good card to get?
 

PantherProud

Well-known member
I was taught to get a card and then put $15 or so a month on it. Something small to build up credit and keep the account active, but nothing they can't afford to pay.
 

Zunardo

Well-known member
I was taught to get a card and then put $15 or so a month on it. Something small to build up credit and keep the account active, but nothing they can't afford to pay.
From a sheer minimum risk perspective, I'd say this the better option - provided you can customize the account and put a monthly spending limit on it so the whippersnapper doesn't give in to temptation. And you can cancel the account at any time, unlike a loan.

I got started when my father co-signed for my first car loan, but that was 40 years ago. He wasn't worried, I was working full-time at a secure job. Three years later I bought a house by myself, and the rest was history. Things are a lot different now!

I've heard that leasing a car helps establish credit. Any confirmation to that? Or do banks look at completed leases differently?
 

Auggie

Well-known member
My wife is huge on this and makes our kids get credit cards to get started 1st year in college, she has access to the account and monitors it like a hawk. Also get an apartment under the kids name in college and pay it off with $s from a 529.
 

NewOldBlood

Well-known member
My wife is huge on this and makes our kids get credit cards to get started 1st year in college, she has access to the account and monitors it like a hawk. Also get an apartment under the kids name in college and pay it off with $s from a 529.
My wife and I are doing this exact thing for our daughter in college. Great advice.
 

Orin Swift

Well-known member
Getting student loans worked great for my credit! Not so much for my debt ☹️

Get a credit card with no annual fee. Be diligent about paying it off. Use it for anything “small” purchased on a regular monthly basis (weekly groceries, monthly haircut, utilities bill, etc) and pay it off. Credit card companies like to see utilization above 15% of max credit line but below 50%, at least as far as credit score is concerned. As chs said, paying rent, utilities, etc. on time helps as well.
 

Zunardo

Well-known member
Forget the credit card.
Yeah, I had to re-think that. One of my sons got a credit card some time back, and then he was inundated with offers for more cards. Bad strategy.

Pay your rent, utilities, and whatever other bills you have on time.
Solid advice, you can never go wrong doing that. My question would be, is that enough to build a credit history so that you'd qualify for a home loan?

Just saw something called a "credit builder loan". Probably been around a while, which tells you how long it's been since I had to worry about that. But basically you take out a loan on a nominal amount, say $500. But the bank holds the money, while you make the payments. If you can get $300 or so, and a term of six months, pay it regularly and pay it off on time, I can see that would be a decent strategy to ingrain some good financial habits and eventually qualify.

And again, anyone know if completing a car lease adds much bank to your credit score?
 

eastisbest

Well-known member
Forget the credit card.

How you going to get into a high school football game?

Yes you can get in trouble. You can get in trouble driving, riding a bike, drinking... I don't see this as different. Is it wiser for them to learn on their own or learn while the parent can look over the shoulder?

Of course they should get a card. Limit their purchases. Pay it off monthly and drill it in, there are no other options. It is not a loan. Oh yeah, teach them abit about compounding percents and the difference between going for a bank loan and using the credit card as a loan machine.

Get the card.
 

Zunardo

Well-known member
How you going to get into a high school football game?
Mom and Dad, of course. :cool:

Seriously, they can use a bank debit card attached to a secured account. I'd guess lots of kids have those, set up by their parents. But you don't make payments on it, so there's no credit-building involved (that I know of).

But an unsecured credit card? Unnecessary for a young person until they have established themselves, IMO.
 

Thavoice

Well-known member
Forget the credit card.

Pay your rent, utilities, and whatever other bills you have on time.
Well......I dont think I have ever seen my rent, utilities, phones, cable, web etc on my credit report......unless you dont pay it and they send it to collections.

A CC is a great way to start. As for what is the best? When you pay it off each month the interest rate doesnt matter. I am unsure what is out there for younglings but look for one with no yearly fee and if possible, some points.

I pay off my CC each week and not month because of how CC report to the bureau's. If you wait till the due date then they may report a higher amount. I have noticed by paying weekly, or more, my score is going up faster than ever because each time they report to the bureaus i have a very low balance, paying on time (of course) and a low credit utilization rate. If you just pay once a month and there is a lot on it can ding your credit in the credit utilization category.

As it is with 5% back on what I use most and paying zero interest I am getting nearly $50/month in rewards that I use for times we go out of town and essently makes the hotel stays free.

They also like a mix of credit so a card, maybe get a small loan such as a car is also a good way to do it.
 

Thavoice

Well-known member
Yeah, I had to re-think that. One of my sons got a credit card some time back, and then he was inundated with offers for more cards. Bad strategy.


Solid advice, you can never go wrong doing that. My question would be, is that enough to build a credit history so that you'd qualify for a home loan?

Just saw something called a "credit builder loan". Probably been around a while, which tells you how long it's been since I had to worry about that. But basically you take out a loan on a nominal amount, say $500. But the bank holds the money, while you make the payments. If you can get $300 or so, and a term of six months, pay it regularly and pay it off on time, I can see that would be a decent strategy to ingrain some good financial habits and eventually qualify.

And again, anyone know if completing a car lease adds much bank to your credit score?
I have never seen rent and other bills on my credit report...unless of course ya dont pay and they send it to collections.
Whlie paying all your bills on time is solid advice, that if they dont report to an agency then it doesnt help the score.

Not necessarily a credit builder loan I dont think but about a year ago Huntington started Standby Cash that they state could help build credit (and I believe it does).
There is an amount, up to $1000, that does get reported to agencies, that you can get, interest free if you auto pay back for three months.

I game the system with it and 'borrow' $100, when it shows up on my credit report I then pay it off, and it seems to up my score a couple of points as I borrowed and paid on time with no interest.
 
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chs1971

Well-known member
How you going to get into a high school football game?

Yes you can get in trouble. You can get in trouble driving, riding a bike, drinking... I don't see this as different. Is it wiser for them to learn on their own or learn while the parent can look over the shoulder?

Of course they should get a card. Limit their purchases. Pay it off monthly and drill it in, there are no other options. It is not a loan. Oh yeah, teach them abit about compounding percents and the difference between going for a bank loan and using the credit card as a loan machine.

Get the card.
Debit card.

mic drop
 

Gh0st

Well-known member
If you get credit cards don't close the accounts, just leave them at 0 but open.

When you're young, the most important thing is probably what you don't do. Don't be late...ever. Late payments are the biggest ding on credit score and you're stuck with the effects for 7 years.
 

Gh0st

Well-known member
I have never seen rent and other bills on my credit report...unless of course ya dont pay and they send it to collections.
Whlie paying all your bills on time is solid advice, that if they dont report to an agency then it doesnt help the score.

Not necessarily a credit builder loan I dont think but about a year ago Huntington started Standby Cash that they state could help build credit (and I believe it does).
There is an amount, up to $1000, that does get reported to agencies, that you can get, interest free if you auto pay back for three months.

I game the system with it and 'borrow' $100, when it shows up on my credit report I then pay it off, and it seems to up my score a couple of points as I borrowed and paid on time with no interest.
You can get any recurring payment reported to a credit bureau including utilities, streaming service payments, etc. Rent can be more difficult and is really up to the landlord. Sometimes companies or landlords don't report the on time payments. One thing I did was Experian's credit boost. They go through your bank statements for the past 2 years and will add report any recurring payments. They won't report anything derogatory so it can only help you. And it's free.
 

Orin Swift

Well-known member
If you get credit cards don't close the accounts, just leave them at 0 but open.

When you're young, the most important thing is probably what you don't do. Don't be late...ever. Late payments are the biggest ding on credit score and you're stuck with the effects for 7 years.
This does not matter when you have established credit. But yes, that’s key when you’re still building it. Credit score likes to see longevity with open lines of credit.
 

Thavoice

Well-known member
You can get any recurring payment reported to a credit bureau including utilities, streaming service payments, etc. Rent can be more difficult and is really up to the landlord. Sometimes companies or landlords don't report the on time payments. One thing I did was Experian's credit boost. They go through your bank statements for the past 2 years and will add report any recurring payments. They won't report anything derogatory so it can only help you. And it's free.
Yep. They dontr credit boost and it does all that.

Other than that boost I've never seen any monthly reoccurring ever on my credit reports. Mortgage. Car loans. Credit cards. Never had utilities and such.

CC is the easiest and quickest bang foe your buck for a credit report. Because %utilization is important i suggest paying off more often than once a month
 

utsherman

Well-known member
No need for them to open a new credit card. If you’re comfortable with your credit history & have a well established card, simply add them as an authorized user. They get the benefit of building good credit history without the liability. Of course if the primary cardholder isn’t responsible, it could work the other way. Lol. This usually works well in a parent/child relationship.
 

Gh0st

Well-known member
Yep. They dontr credit boost and it does all that.

Other than that boost I've never seen any monthly reoccurring ever on my credit reports. Mortgage. Car loans. Credit cards. Never had utilities and such.

CC is the easiest and quickest bang foe your buck for a credit report. Because %utilization is important i suggest paying off more often than once a month
I got about 28 points on my score by credit boosting. I don't have bad credit, but there was so many unreported things in 2 years that it helped quite a bit. Did it before getting my mortgage approved.
 

Gh0st

Well-known member
This does not matter when you have established credit. But yes, that’s key when you’re still building it. Credit score likes to see longevity with open lines of credit.
I got a Military Star card back in OCS almost 20 years ago. Never used it since.
 

Thavoice

Well-known member
This does not matter when you have established credit. But yes, that’s key when you’re still building it. Credit score likes to see longevity with open lines of credit.
Yea...that kinda hurt me. 1998 I wanted to start 2000 with zero debt on CC. Paid my last one off and ....stupidly ... canceled my cards. From 2000-late 2017 I had zero credit cards, only 1 car loan and one mortgage in those 17 years.
the lack of borrowing surely didn't help so even tho I always paid bills on time the fact I had such small history hurt a little bit .. especially in 2010 getting my mortgage.
 

buckeye53

Well-known member
Make sure you can afford what you are purchasing, research your purchase, so you are not swayed by a commission earning sales person,make sure you make your payments on time. My wife and I have been together 45 years. When we first started out, say buying a TV, we’d put half down and pay the rest off with in 12 months. We did most everything in our house that way, and after a short while we did qualify to buy a home.
 

D4fan

Well-known member
No need for them to open a new credit card. If you’re comfortable with your credit history & have a well established card, simply add them as an authorized user. They get the benefit of building good credit history without the liability. Of course if the primary cardholder isn’t responsible, it could work the other way. Lol. This usually works well in a parent/child relationship.
Not certain this is correct, and not certain it is not correct.

Several years back my wife took out two credit cards and put my name on them as well, but she is the primary account holder.

This year we needed to borrow some money so we thawed our credit and applied for a loan with a local bank. They said her credit looked wonderful but mine was deemed insufficient and had no credit score . So she got the loan based on her credit, and fortunately my no credit score did not cause us to pay a higher rate, but was told by the loan officer that is usually the case.

So I am going to agree with The Voice here, that basic cable, electric, property tax etc do not help establish credit, as those are all in my name, and I showed no credit score. I was going to take out a card in my name but the loan officer said that wouldn't be necessary since I signed for the loan I would begin getting credit.
 

Thavoice

Well-known member
Not certain this is correct, and not certain it is not correct.

Several years back my wife took out two credit cards and put my name on them as well, but she is the primary account holder.

This year we needed to borrow some money so we thawed our credit and applied for a loan with a local bank. They said her credit looked wonderful but mine was deemed insufficient and had no credit score . So she got the loan based on her credit, and fortunately my no credit score did not cause us to pay a higher rate, but was told by the loan officer that is usually the case.

So I am going to agree with The Voice here, that basic cable, electric, property tax etc do not help establish credit, as those are all in my name, and I showed no credit score. I was going to take out a card in my name but the loan officer said that wouldn't be necessary since I signed for the loan I would begin getting credit.
I ve seen guys with hundreds of thousands in the bank with not enough credit established as they paid cash for everything their whole lives believe it or not.

Some old school folks are anti CC. They are not all evil if you use them correctly. I do not suggest that the CC should be a course of action when an emergency is needed as ya should have money saved, but they can be very beneficial. Looked at my rewards from my card I got last fall and so far I ve received over $600 in rewards (that I use to pay the bill) and zero interest paid.

Yeah.....you can get into some huge trouble with them but it is the easiest way to start that credit established and with many for noobs having such a small available credit they acnnot get into much trouble.
 

PantherProud

Well-known member
I ve seen guys with hundreds of thousands in the bank with not enough credit established as they paid cash for everything their whole lives believe it or not.

Some old school folks are anti CC. They are not all evil if you use them correctly. I do not suggest that the CC should be a course of action when an emergency is needed as ya should have money saved, but they can be very beneficial. Looked at my rewards from my card I got last fall and so far I ve received over $600 in rewards (that I use to pay the bill) and zero interest paid.

Yeah.....you can get into some huge trouble with them but it is the easiest way to start that credit established and with many for noobs having such a small available credit they acnnot get into much trouble.


I do CC for everything and only use cash at places that are cash only.

And as you state, it's great for rewards.


I don't know if they still have the exact promotion going on, but back in January I got an Amazon Prime Visa. Got $200 in Amazon credit upfront, and get 5% back on all Amazon purchases (which has already netted us at least another $100 in free purchases).
 

Thavoice

Well-known member
I do CC for everything and only use cash at places that are cash only.

And as you state, it's great for rewards.


I don't know if they still have the exact promotion going on, but back in January I got an Amazon Prime Visa. Got $200 in Amazon credit upfront, and get 5% back on all Amazon purchases (which has already netted us at least another $100 in free purchases).
They still do the 5% off for amazon purchases. I usually only use amazon around Christmas and do the free trial and cancel. I used to use that for everything until last fall my newest card gives me 5% back on whatever i spend the most on that month, which is almost always gas.
 

PantherProud

Well-known member
They still do the 5% off for amazon purchases. I usually only use amazon around Christmas and do the free trial and cancel. I used to use that for everything until last fall my newest card gives me 5% back on whatever i spend the most on that month, which is almost always gas.


I think my Amazon gives me 1% on all purchases and maybe 3% at restaurants? I forget exactly.
 

Thavoice

Well-known member
A credit card and keep the balance around 20% of the maximum and don’t miss payments
While 20% is a good utilization rate, I would not say 'keep the balance around 20%'. I would suggest not having more than 20%, preferrably less, at any given time but pay it off and not keep the balance. No reason to pay interest charges.

It is a myth that you should keep a balance.

Credit card report the utilization %, and if you pay on time each month. If one is just doing this to help a credit score, there is no reason to charge much (unless you going for the rewards).
 

Crusaders

Moderator
Credit card companies don’t want you at 0. Having no balance does nothing positive for your credit score. Keep it around 20%. Pay the $50-$60 a month and get the boost. The interest at that utilization is the price to pay for boosting your score
 
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