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Get Your Kid A Good Credit Report

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The Tampa Tribune

Published: September 16, 2007

Like many college kids, my daughter Hannah ended up with a credit card problem. But it wasn't the problem I feared.

As students head to college, many parents worry their sons and daughters will apply for a fistful of credit cards and amass a heap of debt. Indeed, 42 percent of freshmen have credit cards, and they carry an average balance of $1,585, according to a study by college lender Nellie Mae.

But in her freshman year, Hannah didn't rack up a single charge - because she had a heck of a time just getting a card.

Getting Carded

I don't really want Hannah to have a credit card. But I do want her to have a decent credit score. One of the best ways to earn that score is to get a credit card, charge a small sum each month and dutifully pay off the balance.

But which card? For years, Hannah had regularly been offered credit cards by the Continental frequent-flier program, so I figured the folks there were eager for her business. Instead, what she got was a swift rejection.

Next, Hannah applied for a credit card designed for college students. That earned her a rejection on the grounds she had insufficient credit history.

That got me curious, so I headed to AnnualCreditReport.com, where once a year you can get a free copy of your credit report from the three major credit bureaus. I retrieved one of Hannah's reports and, sure enough, she had no credit history.
Credit expert John Ulzheimer, author of 'You're Nothing But a Number,' says pulling your kid's credit reports should probably be your first step. That will allow you to see what sort of history your child has and whether there are errors that need correcting.

Seeking Approval

Got a kid with no credit history? If your child has a checking or savings account, see whether the bank will also give your kid a credit card. Your child could also apply for cards offered by many retailers, which are typically easier to get than general-use cards.

College students might also respond to one of the credit card solicitations they receive on campus. These, however, don't seem as prevalent as they used to be. Hannah has received only a few offers through the mail and has never seen a card issuer with a booth on campus.

If your child has a blemished credit history, the only option may be a secured card. With these cards, you put down maybe $300 or $500 as collateral. That sum then determines the credit line.

Before applying for a secured card, check that the fees are reasonable, the card issuer reports to the major credit bureaus and the card converts to an unsecured card after a year or two, Ulzheimer says.

Another trick: If you buy a new or used car for your teenager, have your child co-sign the auto loan. 'I wouldn't buy a brand-new Hummer to establish a credit record for the kid,' says Scott Bilker, founder of DebtSmart.com. 'But if you're going to buy a car anyway, it would be a quick way to get a credit record.'

With Hannah, however, I didn't use any of the above strategies. Instead, I simply added her name to my Visa card. Within a month, the card's credit history was included in her credit report, so she's now in good shape to apply for a card on her own.

There are two ways to add a child. In the past, many parents have included their children as authorized users. This strategy might work through the end of 2008, Ulzheimer says. But the credit bureaus are closing this loophole because it was being abused by some businesses.

What to do? You could add your child as a joint account holder. Be warned: Authorized users aren't legally liable for a card's debts, but joint account holders are. Also, if you want to end the arrangement, you can't just take your child off the joint account. Rather, you have to cancel the card entirely.

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