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How to Help Someone You Love Build Credit and Boost Credit Score

You can boost a young person’s credit by taking advantage of a little-known Authorized User provision, but credit issuer policies vary widely on how old the child must be.

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Like it or not, ours has become a culture of credit. Good credit is necessary to get the best mortgage rates, a decent credit card, to qualify for an apartment; to get hired, or buy a phone. If you don’t have good credit you’ll be denied that apartment, lose out on the job, pay outrageously high fees, and be required to come up with a large deposit to secure a mobile plan.

Good credit is required to establish utility services like electricity, water, and cable. Just about anytime you need to borrow money or secure service, your credit is called into question.

One question that lands in my inbox regularly goes something like this: How can I help my son or daughter build credit? The reasons for good credit are myriad including renting an apartment, getting his or her own phone plan, getting a good job, and on it goes.

Credit, like job experience, presents a quandary: How can a young person have good credit if he or she has never had any credit?

One of the best ways is to take advantage of a little-known benefit most credit card issuers extend to their cardholders. Add this young person to your credit card account as an “authorized user.” Generally, this is how it works:

Contents: 

Authorized User benefits

Know this downside …

Must Authorized User know about this?

May I add a minor to my card account?

What information is required?

Managing your Authorized User

How long will it take?

Can I un-authorize my user?

 The Authorized User Provision

By adding a child (or any person for that matter) as an Authorized User to one of your credit card accounts, you are allowing him or her to benefit from your good credit. This is totally legal and a way to help this responsible young person build a good credit score.

As an Authorized User, he or she will be able to use your account according to your rules. Each month, as the activity on that account, is reported to the credit bureaus and added to your credit file, it may also go to authorized users’ credit file to build his or her credit history. Credit file history is used to calculate that all-important 3-digit number we call a Credit Score.

Surprisingly, perhaps, as an Authorized User your young person will have no legal obligation to make payments or repay the debt that he may run up on that account. He gets all the benefits and none of the requirements of repayment.

The way it should work is that you have great credit, you are not close to your credit limit and are never late with payments. So far so good. However, if you have lousy credit, continuously keep that account close to being maxed out and are late with payments—that terrible credit activity is going to be reported to his account, too, as your Authorized User.

Are you getting the picture here? It takes two great candidates for this method of allowing another person to piggyback off your good credit to work well—a financially mature accountholder and a responsible, trustworthy Authorized User.

It is ridiculously easy to add an Authorized User to a credit card account. Simply call the Customer Service number on the back of the card and make your request.

Authorized User Benefits

A parents’ well-aged credit card can help a young person’s “credit age”—the number of years that credit-card account has been in place. Credit age is a critical part of a credit history file, and your Authorized User will benefit by claiming your “credit age.”

An Authorized User is able to use the credit card account freely, which for a responsible user solves the problem of a young person finding it impossible to qualify for a credit card account on his or her own. Because the credit card issuer will send you a physical credit card in the authorized user’s name, he or she will be able to use it for emergencies.

Know this downside …

Most, but not all, credit card issuers offer the authorized user provision. Call and find out if yours does.

Another pitfall to watch for: Some issuers who allow an Authorized User to be added to the account do not report credit activity to that authorized user’s credit file. Bummer! Don’t worry, most do. But again, call to find out.

By authorizing this user on your account, you run the risk of him or her going nuts and actually using it without your knowledge—running it up to the max and thereby ruining your credit and costing you a fortune. It can happen! This provision should be reserved for only highly responsible and trustworthy individuals. Make sure you set up very clear guidelines and rules for your Authorized User. More on that in a bit.

Then there’s the other side of the coin, according to Credit.com: Should you as the primary account holder on this account run into tough times so that you cannot keep up with payments, run up the balance to near or past the credit limit, or God forbid default altogether, you will not only ruin your credit score, you’ll tank your authorized user’s credit history, credit score, and future too. It takes years and years of clean credit living to repair and reverse bad credit.

Must the authorized user know about this?

No. This may sound odd or at least manipulative, but you can add your young person as an Authorized User and not tell them. When the card arrives in your Authorized User’s name, put that credit card away in a safe place. Then sit back and allow your user-non-user to grow a killer credit score based on your credit activity on that card. Just keep in mind that good or bad, how you handle that account will go to either help or harm that person’s future.

May I add a minor to my card?

Each credit card issuer has its own minimum age rule from no minimum  (you could add an infant, but I wouldn’t advise it) to a specific age. Most, however, do allow minors to become authorized users. Here are a few examples of the minimum age requirement.

  • American Express, age 13
  • Bank of America, no minimum
  • Barclays, age 13
  • Capital One, no minimum
  • Chase, no minimum
  • Citi, no minimum
  • Discover, age 15
  • U.S. Bank, age 16
  • Wells Fargo, no minimum

Adding a very young child to your account would be, in my opinion ill-advised. There’s no reason to do that. It doesn’t take 18 years as an Authorized User to build a great credit score. You don’t know what may happen during those years that might backfire for the child, especially if you add him or her to your account and then forget. Should you run into a rough patch on the financial highway of life, you could harm that child’s future.

What Information is Required?

It varies from one issuer to another. Some, like Chase, ask for only the name and address of the user you want to add. Others don’t seem to verify age. Citi and Wells Fargo request the name, address, and date of birth of the authorized user. American Express, Bank of America, Capital One, Discover, and U.S. Bank, at last check, require name, address, birth date, and Social Security number.

Pro-tip

It takes a Social Security number to report anything to credit bureaus. That should be your clue which credit card issuers will report to your authorized user’s account. Don’t assume, however. Check to make sure.

Managing Your Authorized User

As the primary cardholder, it would be foolish for you to adopt a hands-off approach. Your authorization for this person to piggyback onto your account should come with very clear guidelines and specific rules—from any actual use to the requirement that if you use it, you repay it. You’d be wise to set up the account with online access, then trust but verify. Daily.

Make sure your authorized knows what to expect if he or she violates your terms and conditions on this arrangement. The consequences should be swift and sure.

How long will it take?

Don’t expect your Authorized User to go from no credit history to having a credit score equal to yours overnight. First, your score reflects many years of credit history based on many things—not just this one account. Your authorized user should see some movement after 6 months of being an Authorized User, provided it is an account you use regularly, pay flawlessly, and never carry a balance of more than 30% of the available credit.

Can I un-authorize my user?

Absolutely. And it’s very easy. A simple phone call from you—or your Authorized User—will remove him or her from the account with no further consequences, at least not from the credit card company!


Up Next:

This Is What Happens When Financially Immature Students Get a Credit Card

How to Repair Your Credit and Improve Your Credit Score

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How to Win the Credit Card Balance Transfer Game

There’s nothing fun about credit card debt. An outstanding balance of $5,000 that is subject to 19.99% interest means you’re paying about $1,000 a year just in interest. Imagine if that $1,000 could go directly to repaying the balance instead. You could pay it off in record time instead of stringing it out for many years.

If you’re carrying credit card debt, transferring that balance to a new credit card with a 0% introductory rate could be the way out of your heavy debt situation. Just beware: There are pitfalls in the balance transfer game that if not avoided could end up making your situation worse, not better.

 

Risk

To play the balance transfer game well requires financial maturity and personal discipline. Are you up to it? Should you wish to play, you’ll need to adopt this strategy to come out a winner:

Fine print

Find a balance transfer credit card application. You want one that offers at least 15 months of 0% interest, has no annual fee, and a small if any, balance transfer fee. Search at IndexCreditCards.com. Read the application very carefully. Know exactly what’s in the terms and conditions.

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With Airline Miles You Need to Do This So They Don’t Expire

If you willingly pay an annual fee for a credit card that earns air miles (most reward cards do come with a hefty price), you might want to re-think that decision. The problem is airlines are changing the rules to shorten the time before miles expire. So sneaky! But for now, you need to protect those precious miles you’ve accumulated.

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Sneaky notification

It looked like junk mail but for some reason, I opened the envelope from United Airlines. Turns out it wasn’t junk, but I have a sneaky suspicion whoever designed this mailer hoped I’d toss it in the shredder.

Inside the envelope was notification that my 38,000 MileagePlus miles would expire on New Year’s Eve if I didn’t activate my account by adding more miles to it before the stroke of midnight. Quite frankly, in the hustle and bustle of the season, booking a flight just so I could log a few more miles wasn’t exactly on my Christmas list.

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How to Break Bad Money Habits

Money a little tight these days? You might assume it’s due to rising costs, tightening credit and the fact you haven’t had a raise in, like, forever. But truthfully, if your basic needs are being met, problems you’re having are more likely a result of bad money habits you’ve picked up—behaviors you’ve repeated so often they’ve become almost automatic.

Don’t despair. In the same way you picked them up, you can replace bad habits with good ones: Stop the old behavior, and consciously repeat the new one so often that it becomes an almost automatic response.

Living without a spending plan

Spending money without a plan has to be the mother of all bad money habits. It’s like driving blindfolded. You don’t know where you are and can’t see where you’re going, so you don’t know when to stop. Pre-spending your paycheck on paper (also known as a budget) is the way to remove the blindfold so you can see what’s going on.

ALSO: Get Financially Fit With Good Habits

Paying with plastic

Depending on plastic—and I’m talking about both debit and credit cards—to cover your day-to-day spending might be very convenient, but it creates a bad habit. You stop noticing how much you’re spending, and that opens the door to overspending. Break this habit by figuring out how much cash you’ll need for the day, and put that much in your wallet. Leave your plastic at home, or put it in a less convenient place in your handbag or wallet.

Rolling a credit card balance

Credit card issuers know that once they can get you to cross the threshold where you owe more on your credit card than you can pay in a single month, they’ve got you where they want you—paying them interest month after month.

If you cannot pay the entire balance in a single month, you’re living way beyond your means. To break this bad habit, make it impossible to use it anymore until that balance is paid in full. Don’t close the account, but put that plastic far from you. Hand it off to a trusted friend or freeze it in a block of ice! Anything to help you break this bad money habit by replacing it with a good one. Then start paying down the balance as rapidly as possible.

READ: You Need to Kick Your Credit-Card Habit

Waiting to save

It might make sense to pay your bills first and then see how much you have left to put in savings, but that’s a really dumb idea. It will lead to a very bad result also known as no savings, because you will keep doing this same dumb thing month after month, year after year.

To break this habit, pay yourself first before you pay any of your bills. In fact, treat yourself as your most important creditor. Make up payment coupons like you have for your mortgage or car payment. Or set up an auto bill payment to “Myself.” Now move “Myself” to the front of the line so that the very first bill you pay each month is to You!

Even if it’s only $25—or even $10—to start with, do it. Over and over again. It won’t take long for that to become an almost automatic response and a very good habit!


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Questions on Online Savings Banks, Opossums, XL Bed Sheets, Stinky Refrigerator, and Lots More!

I love to hear from my readers. I encourage you to write to me, and for that, I get hundreds of messages every day—questions galore, great stories, lots of love, and tons of encouragement. Please, never stop writing to me!

A close up of a computer

While I do read every single message, I simply cannot respond to all of them. And honestly, I don’t have specific criteria for which questions to answer in posts like this.

Generally, I select questions with universal appeal and a high likelihood that others have the same or similar questions. And here’s a hint: Well-written, complete messages with a clear situation and question get special consideration.

Here is a quick summary of the questions I’ll answer in today’s post. You can click on one to go straight to it, or just scroll down to read all. Enjoy!

Contents

1. Are online savings banks safe?

2. Opossums are making my life miserable!

3. Single fitted XL twin bed sheets?

4. Help! My new refrigerator stinks!

5. How can my daughter qualify for a decent credit card?

6. I tried Lestoil and this is what happened

7. Need furniture polish recipe again, please?

 

Q1: Are online savings banks safe?

Dear Mary: The interest rates offered at most online savings banks like Ally.com for example,  are so much better than the brick and mortar bank where my husband and I have our savings. Our rate of interest is terrible! But we are hesitant to move any of our savings to an online bank. Is it safe? I would love to hear your opinion. I love your website! I have used your recommendations on so many things. Thank you. Heidi

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This Is What Happens When Financially Immature Students Get a Credit Card

Our kids are fortunate to be growing up in the most progressive and exciting time in history. Sadly, the very culture that offers them the world is also perpetrating this lie:

You are entitled to have everything you want even if you don’t have the money to pay for it. It’s not a problem. You deserve it. Get it now and you can pay for it later!

A woman sitting on a bed

 

There’s a huge consumer-credit industry out there planning to give your kids their very own credit cards—personal passports into the abyss of consumer debt. This will not require your permission or approval, something that one reader is experiencing first hand.

Dear Mary: My daughter who is in college got a credit card and now she is in over her head, unable to pay what she owes.

She works part-time and makes a very small salary. With the high interest and late fees, the balance is now over $2,500. I will have to step in and handle the account.

How can I negotiate with the credit-card company to settle for less? I don’t know how she got this card on her salary but she kept quiet about not being able to make the payments until we started getting collection calls for her. I appreciate your thoughts and expertise. Millie

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