Think I have my son starting off on the right track... Thoughts?

[b75]

My son is 19 years old, has a good head on his shoulders and is very fiscally responsible for his age (he's sitting on several thousand in his checking account after building for a couple years and working full time while going to a local college).

 

We've discussed a lot about credit, trying to teach him the ins-and-outs that I wish I had known.

 

I AU'd him on several cards a couple months ago - AmEx BCE for the future *D when he gets his own, a couple of USAA Visa/MC (He's a full member with his own login/insurance policy for over a year now), and a comenity Beall's account. All of these are 100% in good standing and decent limits with low/no util.

 

This week we app'd for a USAA Student Mastercard, approved for $300. Also hit them up for a USAA Visa, but no joy (reason returned as "insufficient credit history, kinda expected but worth a try). Went ahead and got him in at NFCU with my referral and opened a savings account as well as getting an approval for a NFCU Visa nRewardsa at $1500. He's wanting to move a couple grand into savings at Navy Fed as well. Gave him both barrels about treating NFCU right and having a financial ally for life. He still lives at home and comes to me with questions so I'll have a good chance to keep an eye on his fiscal behavior.

 

 

 

 

So, at this point, he's sitting on two unsecured "real" credit cards 100% in his own name, plus the above AU's. I'm thinking it's a good time to let it ride for 6+ months to build his file a bit. Told him maybe after the new year take out a loan secured with his Jeep (he owns it outright) just to add a little installment loan history to his file mix.

 

Anything else we should look at doing right away? I'm sure we're a couple years out from a *d'able AmEx of his own (his income right now is only around 15k) - so that's a mid-long term goal...

 

 

Thoughts? I just wish I had gotten the same head start at his age. I'm almost 40 and just now figuring out the credit game.

[BamaInvestor]

Sounds like a good plan but I wouldn't use a paid vehicle to secure a loan. In six months, he should be able to get a loan without jeopardizing his vehicle...my 02.

[chugs102]

he's still young. let him have some fun. blow that savings on some hookers and blow

[cashnocredit]

Sounds like a good plan but I wouldn't use a paid vehicle to secure a loan. In six months, he should be able to get a loan without jeopardizing his vehicle...my 02.

 

^this.

 

The value of an installment loan is extremely low and very little benefit compared to revolvers. There are significant costs in interest and title transfer fees as well.

[mendelssohn]

One good lesson to teach him is not to pay money to build credit. I don't think it's a good idea to take out a loan on a vehicle owned free and clear and pay interest to build credit. When the time comes to finance a new vehicle, I'm sure NFCU will be glad to give him a loan with only revolving credit history.

 

It sounds like you have him off to a good start, especially getting him in with USAA and NFCU. Teach him to PIF before the statements cut as well.

[BobWang]

Jeep (he owns it outright)

 

That's one of the most valuable lessons he can learn.

[shifter]

installment loan isn't worth it.

 

just wait 6 months, try for CLIs on those 2 cards.

 

then try for a Disco (they like thin files) and maybe a couple of others.

 

then after another 6 months, you should be able to get in with Amex and any others as well.

 

after the *D reports, he should be able to get in with just about anything he wants.

[b75]

Makes good sense re not paying interest on an installment just to build credit, guess the "mix" value isn't as critical as I'd thought...

 

He's on board with PIF prior to statement cut.

 

 

 

 

Thanks for the advice, gents - I'll get double value outta it as my daughter is 18 - and not quite as "fiscally responsible" as her brother, lol....

[ronsetoe]

started daughter as an AU on all DW and my cards at under 10 years of age. Once or twice a month she gets preapprovals from Amex, Citi and BOA. When she is 18 she can get her own and take it from there. I doubt she will mess her credit up as she is super tight/cheap..oh she is 14.

 

Great lessons for your kids

[codein]

 

Anything else we should look at doing right away? I'm sure we're a couple years out from a *d'able AmEx of his own (his income right now is only around 15k) - so that's a mid-long term goal...

Nice work, mom. He's ahead of the game at this point. There is no need to go for the gusto right out the gate. A steady build of credit lines seems like a good plan. I would stress good behavior and habits, like PIF, budgeting, and setting future goals. He may end up having a good slew of cards and limits before most kids his age, so hopefully he doesn't blow it on a 3K spring break in Cancun. No rush on the installment loan, but I recommend at least one installment loan in the credit mix before it is mortgage time for him.

[ChrisAZ]

Good work!!! You have set a great example for your child. And you have done some good parenting.

[DollarDog]

So, at this point, he's sitting on two unsecured "real" credit cards 100% in his own name, plus the above AU's. I'm thinking it's a good time to let it ride for 6+ months to build his file a bit. Told him maybe after the new year take out a loan secured with his Jeep (he owns it outright) just to add a little installment loan history to his file mix.

So your son is totally debt free with a sizable savings account and you want him to take out a loan just to try to make his credit score higher? If he stays on the track he's on, debt free with a savings account, he'll have a credit score in the 800s. He doesn't need to borrow money ever at any point in his life in order to have a good credit score. That's seriously very, very bad advice.

[b75]

 

So, at this point, he's sitting on two unsecured "real" credit cards 100% in his own name, plus the above AU's. I'm thinking it's a good time to let it ride for 6+ months to build his file a bit. Told him maybe after the new year take out a loan secured with his Jeep (he owns it outright) just to add a little installment loan history to his file mix.

 

So your son is totally debt free with a sizable savings account and you want him to take out a loan just to try to make his credit score higher? If he stays on the track he's on, debt free with a savings account, he'll have a credit score in the 800s. He doesn't need to borrow money ever at any point in his life in order to have a good credit score. That's seriously very, very bad advice.

Yeah, I agree with the same advice when given above.

 

For the record, I wasn't recommending a loan for the value of the vehicle - maybe a net 90 day 2k loan "secured" by the vehicle, with the intention to deposit the full proceeds of the loan and pay it off from the same checking account within the 90 days. The reason being to pay minimal interest while building a relationship beyond checking/savings with our hometown bank, also adding an installment loan history to his mix. I can't imagine 3 months interest on a note loan being any size able amount, but then again it's been a while since I did the same thing as a young man...

 

I do know that once he finishes college he wants to buy a new-ER vehicle (he's like me in that he doesn't really care for BRAND new) and I felt some installment history on a small note might tilt the interest on a future large note a little in his favor.

 

Appears that isn't correct - mea culpa...

[mendelssohn]

 

 

So, at this point, he's sitting on two unsecured "real" credit cards 100% in his own name, plus the above AU's. I'm thinking it's a good time to let it ride for 6+ months to build his file a bit. Told him maybe after the new year take out a loan secured with his Jeep (he owns it outright) just to add a little installment loan history to his file mix.

 

So your son is totally debt free with a sizable savings account and you want him to take out a loan just to try to make his credit score higher? If he stays on the track he's on, debt free with a savings account, he'll have a credit score in the 800s. He doesn't need to borrow money ever at any point in his life in order to have a good credit score. That's seriously very, very bad advice.

Yeah, I agree with the same advice when given above.

 

For the record, I wasn't recommending a loan for the value of the vehicle - maybe a net 90 day 2k loan "secured" by the vehicle, with the intention to deposit the full proceeds of the loan and pay it off from the same checking account within the 90 days. The reason being to pay minimal interest while building a relationship beyond checking/savings with our hometown bank, also adding an installment loan history to his mix. I can't imagine 3 months interest on a note loan being any size able amount, but then again it's been a while since I did the same thing as a young man...

 

I do know that once he finishes college he wants to buy a new-ER vehicle (he's like me in that he doesn't really care for BRAND new) and I felt some installment history on a small note might tilt the interest on a future large note a little in his favor.

 

Appears that isn't correct - mea culpa...

3 months of payments on an installment loan won't do anything. 24+ months would be ideal, and it's simply not worth the interest.

 

Keep in mind that it's possible to get an 800+ FICO with revolving credit only.

[b75]

Gotcha, makes perfect sense.

 

Thanks for the advice, gents.